This Is Why the Housing Market Is Broken

I think most people can agree that this market just feels weird. And whenever it's time to explain what exactly is wrong, there's a lot of theories out there and little different perspectives with all different agendas and whatnot. But I found a house that really just perfectly describes what's wrong with this current market and what's preventing any actual change that benefits everybody. It may hurt the owners or sellers in the short term now, but overall is going to help the market in general. And this is going to be an actual real life story based on a very handsome and rugged man. Some might say more rugged than handsome. He looks like the angry meme, that guy that walks into the courtroom really angry. And for some reason, looks like everybody's cousin. That's right. I'm talking about myself. I'm going to be talking about a real life example that is going on currently in my life. I'm going to change some numbers and change the address. But please rest assured, this is a real thing that's currently happened. First, let's do a quick and brief history lesson of what happened to prices here, specifically in the Phoenix, Arizona area, but I think most areas kind of did the same thing. We had a massive price increase starting from the beginning of the C word till about beginning to mid of 2022. OK, so mid 2022 was absolute peak of values and it dropped. And the reason it started dropping is because the interest rate went from being nice and low for those two years to starting to go up. Crazy enough, it started going up to like the four or five range, and that's what triggered people to stop buying. But now we've been at seven, six range, and we've just been steadily going up. But anyways, so they went up and then it went down a bit. And then it started going back up again because prices started dropping. Everybody started seeing the market was crashing and already rushed back in. So our story begins right here around March to May. We lived in a 1900 square feet home and there was like it was an older home. So it was smaller rooms. We had two kids already and we were just out growing the space and we wanted to keep growing. And we finally decided because it was a good time of our lives, our funds were well, our budget, our saving was well. Be like, you know what? Let's just move into our forever home and let's stay in the area. And let's see if we can find something that's like substantially bigger that we can we can afford it. And then on top of that, we can raise our kids and not have to move ever again. And, you know, this is the house that we're going to grow them. So we decided to start that process and totally just not really worrying about the market, just because that's the time of our life that we felt ready. So we started moving forward with that. We ended up finding the right house around like February, March area. We had everything we wanted. And on top of that, like this right here, this area where I record my videos is like a guest house with two bedrooms. So, you know, we've Airbnb in the past. We've midterm rented in the past. Right now it's just being used as my magic, the gathering slash office space. So separate from that, we have a main house with bedrooms, bathrooms, all the fun stuff. So it just worked really well for our current lifestyle. So we listed our house. We sold it. And then we purchased the house that we currently live in around the same time. So that's the context of the situation. Now let's get into the meat and potatoes. The people that ended up buying from us fooled us completely just fooled us. They were like, oh, my gosh, I love this house. This is exactly what we've been looking for. We're going to buy this house for a family member. And so we might like give it to them or like, you know, as I sell it to them. They're like going to buy it for them so they can hold it so they can figure out their financing and then let them buy it. So that's what they said. Right. It was buying it for a family member. They gave us a really good offer and it was cash. And we did have some solid finances offers, you know, as well. But we went for the higher priced offer that was cash. And it also seemed like, you know, it checked all the boxes of our heart. Well, they lied to us. They ended up selling it, I guess, to I hope a family member that it was for like another 10 or 15 K. And then on top of that, the person that bought it was not. It wasn't their dream house. It wasn't like the house of their dreams like they said they were. They just Airbnb at our home. It just left a bad taste in my mouth. And I've since learned that Airbnb are people that do these midterm rentals like, you know, their seminars where they tell people, hey, just pretend. Don't tell them what it's for. Don't tell them it's for an Airbnb. You know, make up this story about how it's cute and it's for your family member. So it just, you know, that's why I'm just I'm ready to fight any Airbnb people on site since that day. But anyways, I know I took the money. I took the blood money. So shame on me. Right. Well, these people have owned the house for the last two or three years and it listed it again. The price that we sold it for was approximately 585. Okay. That was in mid 2022. Now, if I show you the range again, it was sold around March of 2022. So around here, right? We went up. We went down. We're slightly going up. Technically, although I will say it's not optimized to the city yet. It's below where it was around March, right? So 519 is average sales price. We're literally about there. So in theory, you would think that they would be aware of this and list the house for the same exact price, because that's technically where we are now. And if I just click the specific city, it's in an adjusted, so just to be SFRs and normal sales under 2000 square feet. If we find March of 2022, which is around right here, we are now lower than that. 447, 466. So you would think that they would sell it at least around the same price that they bought it for, right? What do you think they have it on the market for? Just give me a guess. Give me a guess. Good. Type it in the comment right now, comment section. And if you end up being wrong, go and edit it and see if you're wrong or right. Don't lie. It's all truth. Well, my friends, this house is for sale currently for $670,000. So let's take a step back here. Technically, they didn't buy it for $585,000. If you look at, because they got basically whole sold it by this family member that bought it for them to hold it for them, a bunch of. So they purchased this house from their sweet family members that purchased for them to hold it for them for $600,000. And now they're selling it for $670,000. Where did those $70,000 come from? Did they do any massive remodeling? Well, I can tell you because I want to go walk that house because it's really close to where I live. And, uh, no, we walked through it and it's basically a lot of the same features. It has the same AC has a, it's the same fixtures throughout and like nothing, like maybe they removed some trees and cleaned up the backyard a bit. But as someone who lived in that house, there's no major upgrades that were made. So I ask again, where did this $70,000 come from? So then now we're here talking about what's wrong with the market. It's this imaginary value that homeowners are putting on their house just because in their head, they have this equation of if I live in house and I live in house value go up, but that's not the case at all. If we look at the market as a whole and see where prices are going, that house should technically be priced exactly what they bought it for because we went down and now we're back up. But instead this imaginary numbers get made up and get thrown at the listing price and we just expect homebuyers to pay it. Now you may think, well, Javi, this is a very extremely specific example that happens to be your previous house. So this is just one case thing, dude, I'm helping a lot of homebuyers right now and some of them are buying resale. Some of them are buying new construction. We, we occasionally encounter a resale that, uh, you know, has been on the market 90, 120 days. And there's just one specific example. Actually, it's funny. My client was looking in this specific area and literally about five, 10 minutes away from there, there was some new construction houses for the same, around the same price. They can go get that new construction house and get a 4% interest rate, which would set them $700 a month. But they didn't want to do that. They wanted to buy a resale because they wanted to be in this specific neighborhood. And because there's no daycare nearby and friends and family. So they're like, okay, we'll just pay the extra cost. But let's try to, you know, kind of do the same thing as the new builders are because very quickly, let me explain what the builder is essentially doing is they're writing the contract and they're also the lenders because they're writing the contract. Like they're giving you a big chunk of closing costs, but then they're actually charging the big chunk of closing costs and pie down your rate really super cheap. Basically you're in this three-way agreement where there's two twins and you're like, okay, I'm going to buy this house. And one of them says, hold on, little buddy, sit down there, sign this. Okay. Sign. And then that same contract gives money from this person gives money to you to then give to them. So it's like, anyways, uh, if you want to know more about this, I made a great video recently talking about what I've learned after seeing 10,000, how fricking new construction this last year. So go check that video out after you're done with this one. So anyways, the point is the client had the option to just go get a much cheaper rate, but they wanted to take a risk and look at this new, new resale first. So what we did is we went to go look at that resale home that's been on the market for so long and we offered them, you know, a fair price, but we also asked for like big chunky closing costs four to 5% so we can try to simulate what those new builders are doing and get a much cheaper rate. This listing agent was just like, I have been doing this for 40 years. I have never in my life ever seen anything. There is no way my seller will give you more than 3% of closing costs. That's just not the way it's done. And I was like, Francine, we can literally go five, 10 minutes away and look at new construction houses and get that. That's why new builders are selling because they know it's a crappy market right now for the payments. So they're pre-negotiating with their lending department. Hey, we're going to put in the 6% of closing costs in the contract so that way we can get that closing cost cheaper. So then all we have to worry about now is marketing. Hey, we'll give you a cheap rate. If you come here, we're not asking for anything that's not being already offered in the marketplace, but because of her bias and her experience and like, we just have never done this ever. And the deal didn't work out and we went to get a new construction home and they're very happy now. But that's just one example of it. Another example of it is freaking sellers pricing their houses way overpriced. We make an affair offer and we're not even like lowballing them. It's like, hey, you're priced at 450. Houses are selling for 430. So we're going to start at 430. And then from there, we need to also ask for closing costs and stuff like that. But they're just like, no, no way. I was worth 450. And that's just the final like they're making up this imaginary value just because like that's that's the it's really it's like the homeowner imaginary money problem. If you think about it there, what they're trying to do is like create fake money. This money doesn't exist in the world right now. These people trying to sell this house that used to be mine are trying to create $70,000 right that the bank is going to create. So then they can create it. But it's just imaginary. It doesn't exist. It's not there. And if I look at comps, if I look at what the market is doing, there's nowhere near that this house should be priced at that. And I can say that because I lived in the house and I know the upgrades it had. And I know they're exactly the freaking same. They're trying to sell the same exact house two years later, $70,000 more just because if you want to see the actual listing, I don't think I can show you. Maybe if you're going to be a potential client and you want to work with me in the Phoenix area, like let's do the meetup thing and then I can show you this example. But I can't just give this info. So chill, chill, bro. Anyways, so what can you do as a buyer? Now, some of you guys might be thinking, well, man, no one's buying a house right now. Anyways, dude, somehow all of you August 1st decided to just say, let's buy. Like I, I'm really busy right now. I don't know what happened. Like, like last month or two was kind of slow. And then just out of nowhere, just everybody's like, all right, let's buy. And there's a lot of people buying right now. And that just, maybe it might mean my neck of the woods. It might be where you are, but there are still people out there buying, people be buying. Okay. So if you're out there and you be buying, then here's what you can do to protect yourself. Like if you were, if me and you were looking at this house and I didn't live in it before and I did my research, I would see like, look up the history, look up the history of the house. What's the last time this was sold? What are they trying to do? And if you see it was recently purchased and they're trying to get more money for it, then you need to find out where is that value coming from? Maybe they did put a brand new like solar panels that are like, like paid off. Maybe they fricking put a brand new AC, replace all the windows, ask those questions, get an itemized list of everything there, get a good idea. But if you see that there hasn't really been any major upgrades and they were just trying to come up with more money, then we need to look up at comps. Like did houses in the area just start going really crazy. And there's been a fricking 10% gain in the last year or two, or maybe is it just overpriced? So you can do all that by doing some research online, looking at the price history. You can specifically ask the seller for an itemized list or a disclosure form of all the repairs they've done over the last few years. And of course, doing a very detailed comp analysis of the neighborhood. And you might have to be working with a skilled agent. I mean, a lot of agents won't give you the time of day now until you sign a contract. Unfortunately, it's just the way it is now. So maybe you might have to wait until you're working with someone, which by the way, if you need a referral, I have a great referral program below anywhere in the country. But once you're ready to go and you feel like you are working with someone, have them pull up those comps and get a good idea of what's out there so you can protect yourself. If you are in a situation where you're just like, dude, I'm in love with this house. I'll pay more for it. At that point, maybe a good little slap where you get one of those rubber bands and hit yourself because you just don't want to be the most expensive house, the most expensive purchase. I've been in that position. I've seen people in that position where you let emotions carry you. And like, oh, crap. Well, I'm here now and I decided to do that. And now I just live in this expensive house and I'm hoping that everyone else starts selling for more. But if not, then you're kind of stuck at the top. OK, if that's the case, it is what it is. But at the end of the day, if you make an offer and they're not really willing to work with you and they're being stubborn, they're not really getting reasoning, then move on. Walk on. You have the ultimate power because you can ultimately say no thanks and you can walk away from the situation. It's going to hurt for a few days. It might hurt for a week or two. But I promise you there is more deals out there. I have never seen someone like lose a house or stop looking for a bit and them not come back and then eventually find something they like. It always has happened. It might take longer or shorter depending on the market and the time of year you're buying. But ultimately, it's possible you're going to be fine. Take a deep breath. So sellers price reasonable. Let's not try to make up money and try to, you know, just force people to pay more for a house that you think is worth more. Buyers do really well research on the neighborhood and be aware of the position you're buying in. If you're going a little higher than the comps, be aware of it. If you're going lower than comps, be aware of it. You know, there's a solid strategy for whatever your situation is. And last but not least, this is really important. Okay. I don't care if you don't listen to anything in this video, but you need to listen to this. Make sure to.