Welcome back to real estate mindset now Nationwide home prices from Peak are Down $10,600 and on top of that interest Rates mortgage interest rates have been Plummeting except the last three days Post the aggressive 50 basis point rate Cut to the federal funds rate in today's Video we're going to go under the hood And we're going to compare what it's Like to rent versus own and we're going To look at that data over threeyear Period of time so I'm going to eliminate The emotions and we're going to look at The simple math to see what's better Right now on average now in addition to That we're going to look at leading Indicators like prices days on Market Payments demand mortgage applications But remember real estate is about Hyperlocal markets and if you want to Know what's going on in your markets Understand that generally properties are Located in subdivisions and using simple Math and filtering the data you can Understand the Trends on what's going on In your Market if you're new to the Channel or haven't taken it yet remember I have a free home buying course in the Link in my description I've been doing This guys roughly for 20 years so there Is overwhelming value in the courses That you can take right now for free if Those courses are helping you and you're
Learning comment below and let everyone Know they're helping now a couple quick Notes we have now entered a rate cut Psycle with the Federal Reserve starting With an aggressive 50 basis point rate Cut to the federal funds rate now number One prices are down at the same time That demand is down at the same time That payments are down at the same time As inventory is up in other words you Guys the realtors that said and Professionals and anyone really that Said that a flood of buyers are coming Back to the market were flat out wrong And I'm wondering if we should get a mug With the saying they were wrong now to The right I want to go over what like Real quick renting versus owning over 3 Years if the difference in renting Versus owning is $11,000 now in my Market in my current situation it's way More than $11,000 to own what I'm Currently renting but what I'm going to Use is $1,000 difference and comment below Maybe it's different for your Market let Me know but for me it is different it's Closer to $2,000 nevertheless if we invest that $1,000 as we're renting we're left at The end of 3 years with close to 42 $2,000 in liquid now if we own we have Roughly $2,310 if there's no equity gain and all
We're counting is the loan being paid Down because remember you guys getting a Mortgage can be a horrible deal because Of the way that mortgage is amortised Now above the surface it appears that we Would have 340% more profit owning versus renting I Want to go deeply into the hood because Those numbers are wrong let's do a fair Comparison and let's use math and take Today's information and see whether or Not on average is it best to rent versus Own starting with this amortization Schedule I'm using a loan amount of 324,000 on a 30-year loan at today's Interest rates of 6.17% you can see the total interest Over the life of the loan is 388,000 but All we're going to do is use the first Three years to do the comparison so in The first first 3 years the total amount Of principal that we pay on that loan is $2,310 you don't need to remember this I'm going to show you all of these notes At the end of this segment number two We're going to talk about the tax Advantages of owning and I am not a Financial adviser you're going to want To talk to a CPA but I got this next Information Straight From Freddy Max's Website take a look when we use a Purchase price of 350,000 add a 10% down payment what Today's interest rates is
6.17% this is showing on our taxes that We will have a yearly tax savings of $ 5, $385 I bring this up because that's Something that I take into consideration As far as the pros and cons of owning Versus renting and again now that I'm Renting one thing that I really miss About owning is the tax breaks I used to Get but nevertheless always contact a CPA I'll get to equity here in a second But now let's talk about expenses Starting with maintenance I use this Chart on a $350,000 home and I'm going to use and This is important to understand the low End again you guys I'm going to use the Lowest end which is an annual Maintenance cost of $3500 but look here It can get up to according to this data $144,000 so I'm only using $3500 over a Period of 3 years in addition to those Expenses we're also going to do HOA Expenses according to these statistics ICS the average is $170 now to me that Seems a little bit high but over 3 years That's going to be $ 6,120 expense over a three-year period Of time so what we're doing here is We're saying okay here's how much your Mortgage is here's how much your rent is The difference in that is $1,000 plus we're also going to add on Equity and we're taking out the expenses
That I just went over now let's talk About how to invest your money Potentially if you're renting looking at This investment calculator and taking The $1,000 difference per month and Putting that into an investment account That yields annually 8% over a course of Three years and this was suggested by The way I didn't come up with the 8% This program came up with the 8% so I Think it's fair nevertheless if you're Renting at the end of that three years If you invested your money you should Have a liquid $4 41,8 184 Let's compare all of these things take a Look starting with the own column on the Left I've added the loan Equity there at $2,310 I've also added home equity of 3% On a $350,000 house now different markets Will do different things and we're Assuming that home prices aren't going To go down which I believe they are Going to go down but nevertheless we're Going to use three% which would total $31,500 in home equity and remember That's not liquid we have to take out of The equation maintenance because Maintenance is not in your mortgage so After 3 years the low end of Maintenance Should be around $10,500 when we look at 3 years of HOA Fees that's
$6,150 now remember you guys because It's not liquid in order to gain access To any of that Equity there's going to Be a fee whether you refy or sell and I'm going to take the lower end of that Fee and say it's 3% when on average it's More like 8% so the total of fees to Refinance or sell on average at 3% would Be roughly 9,720 and understand it could be double That amount when we add the average Income tax benefit of $1 16,1 155 that gives us a total of $ 33,6 of potential Equity after we minus Out estimated expenses we invested the Money we would have got renting not only Freedom to move and no surprise Increases we would have got $ 41,8 in profit so as of right now using This information it appears that it's Smarter to rent and that the profit on Top of the freedom would be 19.7% more Profitable to rent over a 3-year period Of Time Versus own on conclusion of the Segment what I want you guys to Understand is that the math varies Greatly and the market varies greatly in Other words it's not just a slam dunk Purchasing a house and if you have to Purchase a house right now the more Fundamentals you use UPF front the safer You will be in the long run and that's The point I wanted to make when Comparing rent versus own the name of
This week's red fin article is housing Payments post biggest decline again Payments not prices in four years ahead Of fed's historic rate cut which could Lure buyers off the sidelines and I'm Asking the question why not sellers Because that's exactly what it looks Like is starting to happen this was Released yesterday September 19th couple Things I want to read here monthly Housing payments have declined nearly $300 from April's all-time high Improving affordability has yet to push Up pending sales but that could change After the FED interest rates for the First time since 2020 this week but Again the last 3 days mortgage interest Rates went up not down despite mortgage Payments being $300 cheaper and rates Being about 100 basis points lower as This article is indicating demand has Not come back that's starting to become A stark reality for a lot of Professionals that were giving the wrong Advice we see that in this data as well This is mortgage News Daily when we look At this year-over-year it's not quite Year-over-year I'm going to September 25th to August 26th because we're still Missing some purchase index information You can see I've notated that there so Instead of using the 6.09% in other Words you guys mortgage rates are in the 5% right now remember all the people
That said oh head games with consumers They're foolish machines and animals and As soon as they go to 5% people are just Going to go buy houses wrong but Regardless of 5% being in the market We're going to August 26 and when we Compare those numbers what we see is Interest rates are about 100 basis Points lower but demand went down down So even though rates went down 100 basis Points demand is down I've notated Comparing the purchase index starting in September of last year at 144.5 that has Gone down to 131.8 so far the only thing that's Happening is inventory and new listings Are going up and I'll get to that here In a minute I'm going to go back into The redin article and I want yall to Tell me please seriously comment below And tell me whether or not you agree With them and I'm going to share with You a little bit about my comments but I Want to hear what you have to say do you Agree with them or not are they just Trying to make the market seem stronger Than it actually is here's what they say I'm glad they're confirming this first Part mortgage applications are rising And remember that's an application not a Closed deal but pending sales have yet To improve mortgage purchase Applications are up 5% week over week With some buyers jumping off the
Sidelines as mortgage rates fall but Many wouldbe buyers are still holding Off with pening home sales down A whopping 6.9% year-over-year one of the biggest Declines since October of 2023 and again That's with lower interest rates that's Despite both lower housing payments and More homes to choose from and I'm going To ask you guys so why don't you think Home buying demand has come back do you Guys think it has anything to do with Prices anyone think that at all I do I Think it has a lot to do with prices not Matching income growth let's keep going New listings are up 5.1% year-over-year And the total number of homes for sale Is up 16.1% year-over-year there are Several reasons sales haven't yet picked Up home prices are still Rising now I Did put wrong there because according to Their own data they're not Rising They're down over $10,000 from Peak That's why I noted that but again share With me your opinions redin agents Report that some wouldbe buyers are Waiting for mortgage rates to fall while Other prospec of buyers aren't even Aware that rates have started to fall Aside from rate related reasons agents Report many House Hunters are confused About the new National Association rules And others are waiting until after Elections and I'm going to tell you guys
That new buyers rep agreement doesn't in My opinion it does not help buyers it Helps Realtors because now they can say You legally have to sign this buyer rep You legally have to be committed to me To work on buying a house I hate it Third paragraph buyers are holding their Breath watching interest rates there's Penup energy with people waiting for the Right moment to buy a home and it's Feeling they always go to their feelings Not the math like a dam is going to Burst they're always serving that dish Of fear of missing out right just right Around the corner you're going to lose All of your opportunity right around the Corner once things are more settled and People know where mortgage rates are Going to land and who is going to be President the market is going to get Busier I think winter will be busier Than summer which is the opposite of a Usual year and again what about price Why no mention of that you know guys Maybe I'm bias I've seen comments like a Flood of buyers have come back uh They're out in full force which I'm like What are you guys talking about Literally every single data set is Saying the buying Demand right now in Pretty much in virtually every single Market is in the gutter worse than the Great financial crisis let's look at This week's lead leading indicators and
I'll show you just that now this week's Leading indicators is showing that Interest rates are actually down from 7.33% now day over day that's at 6.17% So again down greatly when we look at The weekly average again down almost 100 Basis points and yet mortgage purchase Applications are still down Year-over-year by only 4% that's not a Closed transaction redin home buying Demand is showing down way more at 7% While Google home searches for sale is Down and whopping 16% moving on to the winners and losers Let's look at Red Fin's top 50 most Popular Metro areas and see how they're Doing now starting with price increases And decreases in the increase column or The winter column depending how you look At it nark is leading at 11.8% Milwaukee At 10.2% Providence at 10.1 nsha at 8.7 Warren at 7.9 the loser column has nine Metro areas they're only showing five Austin down 4.8% and that's year over Year over year Austin has taken beating And look at this California whopping 3.1% in Oakland California and then we Have San Antonio down 2.5 another Dallas Metro at 2.3 and Tampa Florida at 1.5% year-over-year Decline and that is The 4-week rolling average when we look At pending sales look at the loser Column West Palm Beach down 20% Miami Down 19% New Brunswick down 14.9%
Another Florida Fort Lauderdale down 14.7% so Florida's plummeting Atlanta Down 14 . 2% pending sales are up though Single digits San Antonio San Jose Phoenix I start San Diego because I'm Watching San Diego a lot of crazy stuff Out there and then Cleveland as well 3.6 Now take a look at new listings leading The way in new listings Las Vegas 18.3 Phoenix very close to Las Vegas 18.2 San Jose up 17.1 New York up 14.9 and Anaheim up 14.4% with new listings moving right Along to Red fins median sales price Charts you guys know how much I hate the Revisions but it seems like this week They're finally acknowledging this the Fact that home prices are actually down We're not at 390 anymore which it seems Like we're at 390 for the last 5 weeks But right now we're at 385 375,000 we're Down from 396 in other words you guys We're down roughly $10,600 we started The year at a median of 36133 which means if we're going to end The year with year-over-year decline we Have another 20 $4,000 to go down on the 4-we rolling Active listings slightly under 1 million Sitting at 98,5 4 we need this to reverse however It might not until March it just depends How low rates go because the lower the Rates go the more homeowners will get
Off the sideline to sell their houses Look at the trajectory of new listings The trajectory is going up and we're Almost ahead of 2022 now on a lot of These graphs all I'm doing is comparing 2024 to 2022 because remember in 2022 we Had median sales price decline we had Deflation in the housing market the Second half of 2022 so we are almost now Ahead of that time when it comes to new Listing and that trajectory is going up Keep your eyes on that I think the Reason and I hope the reason we're Saying that again is because that golden Handcuff effect meaning the lower Interest rates go not that there's going To be a flood of home buyers there'll be A flood of Home sellers keep your eyes On this data that is Bucking normal Seasonal decline again it's going up not Down when it normally goes down Supply Is a measure of active listing units Versus demand that equals Supply we're At 3.9 right now you guys and look at The trajectory that is freaking Skyrocketing so that's beautiful to see And right now we're at 2017 and 2019 Levels of Supply I want you guys to stop Real quick and think about that few more Leading indicators when it comes to days On Market we're sitting at 37 days we Didn't hit that Mark in 2022 until November 27th so again that's why I Think that we will end this year with
Some type of nominal home price decline I'm hoping 5% at this point regardless Stay on top of the data I know we have Voodoo proprietary indexes but Nevertheless this is the data we have I'll be watching it price Cuts continue To accelerate despite average mortgage Payments being down $300 again because Price matters more regardless we're Sitting at 6.5% % even with lower Interest rates again I want you to think About that they pulled so much demand Forward that even lower interest rates Plummeting at this point in the cycle it Doesn't even matter so far when we look At home buying housing payments that is Down finally finally 2.7% year-over-year I'm not saying I never said payment's Not important I just said price is way More important almost all of the time I Never said payment is not important Because payment is definitely important And right now even with that $300 Decline we're still roughly $900 higher Than what we were in 2021 as I've Indicated with that red vertical line Red fin a home buying demand index down 7% at this point in your journey you Should know my feelings on the housing Market and essentially what I think is Going to happen that is if you've been Paying attention some people don't pay Attention that's fine but if you have You probably know what I believe is
Going to happen but what I am interested In and fascinated to learn is what do You guys think is going to happen next What do you guys think is going to Happen in 2025 if you can comment below I'm going to read every single comment I'm going to do the best I can to Respond to that but I am excited to hear From you let me know what you think is Going to happen next in the housing Market and if you're out there investing In real estate you guys already know I Wish you luck and I hope you win
