Potential home buyers are canceling Contracts right now at a pace we have Never seen before in the history of the Housing market and I'm going to say guys If you flip-flopped and you decided not To buy and you canceled your contract First of all I'm proud of you sometimes It's okay to walk away but just make Sure your earnest money is not at risk Happy Tuesday and welcome back to real Estate mindset today's video is going to Be absolutely Bonkers now the data is in And today we're going to talk about the New record that was shattered for Canceled contracts and then we're going To ask you know what I think are pretty Obvious questions why are people Canceling the purchase contracts to the Houses they want to buy and why did they Even start looking at houses if it was That easy for them to cancel and also Understand this you guys interest rates Are going down so cancellation rates are Going up at the same time as interest Rates are going down so it's very likely And I've been telling you guys this I've Been trying to prepare you I've been Begging you guys to stay patient and Work on your purchasing power more than Likely what will happen is is interest Rates will go down at the same time as Price is going down and that's exactly What's happened so far starting in July Of 2024 now regardless you guys a Redfin
Article came out yesterday highlighting A couple data points that I think is Important now the name of the article is Existing home sales Rose 6% last month But we're at the lowest level July on Record and that's because the housing Market right now is an absolute dumpster Fire there's a golden handcuff effect Going on right now and what will happen Is is depending on what the rates go to There will be a flood of sellers not 100% sure how many but there will be Millions of sellers that will sell their House when rates go low enough for them To afford that again that's called Golden handcuff effect and it's still There these people are still locked into Their houses but going back into the Article home prices were 7% below the Record high so home prices are going Down there's more proof right there but Look at that last bullet point nearly 60,000 that's a lot home purchase Agreements were cancelled so 16% of transactions were cancelled in July holy smokes comment below I mean Don't you guys think that's a lot of Cancelled contracts I wonder how many of Those people got their earnest money Back your earnest money is generally Money you put down to basically tell the Seller I'm serious about this and if I Cancel the contract you can have this Money back now obviously there's ways to
Protect your earnest that's really where A good realtor and a good loan officer Come in they can help navigate you Through that process generally to Visualize how bad sales are take a look At this graph from red fin now you guys Can see annualized for July of 2024 We're at 4.1 4.1 million sales now Obviously guys I went on Jason Walter's Channel in December and I said we're Probably going to be under 4 million Sales probably more like 3.5 million Sales keep your eye on that because it's Starting to look like we actually will Have less than 4 million sales why is That a big deal I mean look look at Going back into history look at how low We are for home sales which means to me This is a chart that we can look at to Kind of guess and get an idea of how Many people are on the sidelines wanting To sell you guys there's millions Millions of people right now that would Sell if they could afford to also what I'm saying is some of these people may Not have a choice life may be so Unaffordable that they have no choice But to sell their house and cash in on Equity again unless they purchase after 2022 take a look at this chart as far as The cancellations this is the home Purchases home purchases fell through at The highest July rate on record and Again you guys this is for July highest
On record this goes back to 2017 but This is telling us that buyers are not Strong buyers right now if they're Flip-flopping again so easily they Shouldn't be purchasing real estate if You're going to purchase real estate you Better go in with strong fundamentals And you better go in understanding what You're getting yourself into and Understand you may be locked into that House 10 15 years and also understand That you may be able to get that same House two years later for 15 20% lower While also having a lower mortgage Payment an interest rate but either way Take a look at this guys we're at 15.8 Last year we're at 14.7 but I really want you guys to look At left of 2023 I mean look at what the Normal Market is the normal Market is Right under 12% you guys could really See once we were past midye of 2022 That's when the housing market turmoil Really exploded so not only do we have Record low sales the sales that we do Have these buyers are barely agreeing to Close and again that's happened after Quantitative tightening and these are The people that are purchasing right Here that you guys can see that are Smart it's the other percentage of People that are now stuck in their Houses with generally without an ability To sell and without an ability to
Refinance without having to come to the Table with potentially hundreds of Thousands of dollars let's ask the Question why are people canceling their Purchase contracts and I want to believe It's because people are getting smart But what I'm going to look at today you Guys is all of the expenses of owning a House that are adjustable remember if You get a fixed rate mortgage the the Only thing that's fixed is your Principle and your interest right now we Have a horrible crisis going on with Property taxes homeowners insurance Assessment and property insurance as Well all of those things are absolutely Blindsiding some people and I want to Show you if you buy right now what You're really getting yourself into We'll also look at PE ratio and payment To income ratio but before I absolutely Tear up the markets because I am I also Want you guys to realize that normally I'm bullish on the housing market I've Only been bearish for about two years And I want to acknowledge as well the Good things generally there are good Things about owning real estate okay Generally there's two things okay we'll Sum this down number one generally you Get a tax deduction from the interest if You exceed the standard deduction and Number two you get future Equity so you Get tax deduction usually and Future
Equity if those things aren't there and That tax deduction is not worth the Gap It takes to rent versus own then it's Not even a benefit to begin with and Here's the other thing people are Starting to figure out that home values Really aren't going up after all let's Start with homeowners insurance the Average annual cost of homeowners Insurance in 2024 is now $2,522 but when we go back to 2021 when Things were way more affordable I mean The housing market was just so much more Affordable back then in order to get a House you had to go through bidding wars Appraisal gaps waving contingencies it Was horrible but in 2021 the average Homeowners insurance was only 1984 homeowners insurance on and this is Just on average in States like where I'm At in the Panhandle it is way way worse If you're going to purchase a house Understand okay that your homeowners Insurance generally goes up property Taxes HOA and maintenance it's not just Your mortgage it is not easy to own House if you're strapped for cash and The government's doing quantitative Tightening couple key takeaways that I Want to go over with insurance now Florida homeowners pay the most for Homeowner insurance with an average Annual rate in 2023 sit down for this Guys
$1,996 think about that think about Paying 11,000 and that's just on average Think about paying 11,000 or $1,000 a Month just for homeowners insurance you Guys want to buy yet you guys interested In being a homeowner are you happy Renting let's keep going that's expected To increase by 7% in 2024 to almost $12,000 now the state with the second Highest insurance is Louisiana again in The Panhandle and this is really Horrible because Louisiana's already Taken a massive hit for home prices but The annual this is more than their taxes Their insurance is more than their taxes Sitting at 6,354 is absolutely horrendous you guys You never really own the house even if You pay off the house you don't pay your Taxes the state will take away your House you guys want to own a home yet When I pull up the map here you guys can See again the Panhandle has it the worst Texas Louisiana Mississippi Alabama Florida but also Oklahoma California's Catching up Arizona's catching up East Coast a little bit still a little bit Light on the West Northwest still a Little bit light on the East Coast as Well but again you guys if you're in the Panhandle like I'm in the Panhandle you Are getting ravaged by homeowners Insurance and not only are we getting Ravaged by homeowners insurance it seems
Like every week of homeowners insurance Company leaves our entire State it's not Good what's happening right now the most Expensive States again we talked about Florida Louisiana there's Oklahoma at $5,400 there's my home state of Texas at $4,400 it's important to note that this Is for 2023 and the expectation for 2024 Is on the right Louisiana is going to Get hit hard Louisiana is going from 6,300 average to 7,800 average again Exceeding the actual property taxes it's Really hard to imagine that Mississippi IPP sitting at 4,300 and then Colorado At $4,000 Nebraska really surprising 3900 sarry Alabama at 3,900 then we have Kansas at 3,400 and Arkansas at $3300 how much do you guys pay if you're Renting right now how much do you pay in Renters insurance comment below I want To go over is the other major adjustable Expense of owning a home which is Property taxes take a look at the name Of this article property taxes balloon After exuberant pandemic era home gains Us Medan single family home property Taxes have risen by more than 25% since 2019 when you look at this chart it's Only going to 2023 now personally I Don't think this is accurate but when we Go to all properties we can see that it Went from roughly 2287 all the way up to $2,826 and I'm going to tell you guys
And you if you've been following me you Know that this is way worse than what it Really appears if you're not protesting Your taxes if you haven't signed the Petition you're allowing the central Appraisal districts to rob you blind you Guys need to stop the appraisal Districts from over assessing the value Of your properties they are backing into Numbers and budgets they have to hit so They're not giving us Fair taxes this is A massive massive problem again this This is not even 2024 2024 is going to Be worse but there is a major difference 23.6% okay massive difference when we Look at the national map you guys can See what states are the worst and look At that okay East Coast Northeast Coast That's an area that has limited Inventory so I asked myself how would Home prices go down in the Northeast When the inventory is kind of low right Now well first of all we would have to Have inventory go up and the other thing Is is you know those people are getting Crippled with unaffordability those Markets are so overheated it's it's Going to be an absolute meltdown I don't Know how they can afford to live there But look at some of the other states you Guys Texas right there 4500 to 6,000 Texas and Florida get hit with insurance And property taxes there are some Counties that are absolutely bankrupting
Homeowners with property taxes this is Something that can absolutely Blindside You and all the things I've gone over so Far and I'm about to go over understand If you're on a fixed income like if There's someone on social security Income how can they afford these Increases comment below how can they Afford these increases the other thing About the corruption take a look at this You guys the school districts in the Counties are absolutely broke yet the State and property tax revenue is off The chart so I asked the question How how could you have record breaking Revenue and still be broke I don't Understand that do you guys want to be a Homeowner yet let's now talk about HOA Assessments there's an absolute crisis Going on right now especially in places Like Florida also in New York but Especially in places like Florida and I'm going to sum up what's going on in Florida with just reading the name of This article which is South Florida Condo owners are dumping their homes After getting slapped with a six figure HOA special assessment imagine this for A second imagine owning a condo in Florida and paying off your whole Mortgage okay you're on a fixed income You retired there and all of a sudden You get a bill for $250,000 because your HOA messed up and
The insurance is now a lot higher on Your building think about that you guys That's going to bankrupt people and These are generally the people the Highest risk because they're on fixed Income and retired HOAs right now Massive problems and crisis going on in Florida and other areas as well but what I'm trying to say is if you do get a Townhouse a condo a PUD whatever it is Make sure you understand what's going on With the HOA and make sure to check if They have any active lawsuits we just Went over adjustable things but another Reason why people are cancelling in Massive flocks is because the national Payment to income ratio take a look at This guys this is updated up until May So it's actually a little bit different Now but right now we are sitting at 35.9% of your income going to paying Your mortgage and that does not include What I just went over which is property Taxes homeowners insurance or HOA that's Right that 35.9% not only is not including those Things it's also going off of gross Income including a 20% down payment Which means that number right there is Much worse for everyone if you have Property taxes on home owners insurance Or an HOA it's much worse than that and I want to bring your attention to where We were at during the GFC sitting at
33.9% now if you guys go back into the Mid 70s and early 80s you see that the National payment to income ratio was Actually higher and people make this you Know make this argument all the time and There is uh there's Merit to this They're like we think what's going to Happen in this housing market same thing In the 70s and 80s when there was an Inflation battle eventually home Eventually home prices will sustain okay And you can kind of see that looking at The national payment income ratio but What I try to explain to people is is The payment is just to confuse you what Really matters is the price take a look When we look at the home price to median Household income ratio we have never Been this high and I've highlighted the Mid-70s on the bottom left to the mid 80s and you guys see the payments were High took a lot of income but people Could afford it because they were making So much money wage growth back then was Flourishing consumers were strong as was Purchasing power right now we can't even Handle 6% interest rates back then they Were Ling 18% interest rates and had Assumable mortgages we don't have that Right assumable mortgagees on Conventional we don't have that right Now we're sitting at 7.73 years of Income to pay off your house that has Never been this High it is disgustingly
High right now because again you guys Prices exploded meanwhile income did not In conclusion here's what I want to say Once again if you walked away I'm proud Of you I have to be careful saying this But potentially it's potentially better To walk away and lose a little bit of Your earnest money than be locked into To a depreciating asset that cost you Half of your gross income to afford and Again you guys that's if everything Stays fixed again the property tax stays The same homeowners insurance stays the Same HOA stays the same let me ask you This question okay and I'm a loan Officer so I kind of already know this But people that purchased back in 2021 How many of those people do you think Maxed out their Pre-qualification how many as a loan Officer most people max out what they Can afford and so now when you fast Forward to today those people that Purchased in 2021 their lives if they Maxed out that prequel their lives have Turned upside down even with a 3% Mortgage rate in other words you guys It's not just a slam dunk purchasing Real estate and we also see that because It's way cheaper overall it's way Cheaper to rent versus home now I really Hope you guys like this video I'm going To try to get an evening video out on Lows today once again happy Tuesday
Sorry for a little bit late video I hope You guys do great today and if you're Out there investing in real estate you Guys already know I wish you luck and I Hope you win
