We Asked Brokers: Where Is the Biggest Buyer's Market Today?

0:00Justin Hroch:National housing data can tell us where listings, price cuts, and sales are moving, but it can't tell us what a market is actually feeling like street by street. Right now, the national picture is giving investors mixed signals. Inventory is growing in some metros, buyers have more negotiating powers, and price cuts are common, but other markets remain tight and competitive. Today, we're going past the averages with three brokers and investors working in very different parts of the country. Micah Mortag is covering Georgia, Florida, and the Southeast. Justin Harak is out of Austin, and he's going to be covering Texas in the South.

0:38Justin Hroch:Will O'Donnell joins us from Long Island with a Northeast perspective. We'll compare supply, buyer demand, pricing, concessions, rehab and exit risk, and where each one of them sees opportunity. I'm James Danner. This is On the Market. Let's get into it.

0:58Justin Hroch:you know i think one of the biggest things for real estate investors is making sure that we know what's happening outside of the stats and the best way to do that is boots on the ground what is going on in the daily grind of everyone's market per real insurance.com august housing report active listings were up 3.6 percent and 20.4 percent of listings had price reductions And what we're seeing is certain markets are moving faster, certain things are getting absorbed, and some are getting worse and worse by the month. So we're going to dig into all these regions and find out what's going on. I'm going to kind of kick this off with the West Coast and the Northwest, because I can tell you right now, if you're a seller, it's not that enjoyable.

1:39Justin Hroch:We're seeing a lot more inventory. I personally have now 14 homes that just hit market. And typically, I sell out about 60 % at a time. I'll keep pending. and right now I have about 15 % pending. We're not seeing a lot of bodies come through where the bodies were coming through for the last six months, but it has slowly, slowly been dropping. And the numbers are kind of speaking for themselves right now. Seattle's inventory is up 27.3 % and price cuts are averaging around 4.6%. So we're seeing a big shift in what's going on, especially if you're a flipper, because what that's saying is we're coming about 5 % off what we thought our performance numbers were working.

2:18Justin Hroch:and it's taking a lot longer to sell with all this active inventory coming in. And so like part of this whole game is, you know, there's seasons in different timing going on, but we're definitely seeing inventory increase as houses are coming on and buying demand has dropped. And so I want to dig in really quickly to what's going on in your market and then what you guys are doing to kind of pivot around this. Because I know in Seattle, we have to kind of stay in front of it. Because if you sit there and you wait for the price, you're going to wait for way too long. the debt's going to eat up your deal and you have to kind of shift down and just cut price and move it on.

2:52Justin Hroch:On the upside, though, we're buying deals at least 15 % cheaper than we were buying them nine months ago. And so if I was paying$500 ,000 for a house, we're finding these in the low 400s now. And there's been a big shift in what we can buy. And so even though we have the most homes for sale, the most money out right now, we're buying more homes than we were even four to five months ago. Because I think the name of the game is you got to get rid of your bad inventory and load up with good inventory and get things moving. But it's not that easy because price cuts aren't solving the problem here.

3:24Justin Hroch:You know, we'll do a price cut and we don't see any more bodies come through. And so it's really about getting to the right price point and getting things moving to get the activity and then really working the sales on the phone. I have gone from really focusing on investing to I'm a broker on the phone, working phones, dragging in offers, working deals, and that seems to get it pending. And so we want to know what's going on in each region. They're all a little bit different. Seattle, Portland, Spokane County, all getting toast on the Northwest. But then we see little pockets like San Francisco.

3:56Justin Hroch:We've seen the highest sale to list ratio and it's had a massive rebound over the last 12 months. It is at 108 % of lists. So the homes are selling for 8 % over list price right now. So I want to know how it's going on each one of your markets, what you're seeing, what you're feeling, and what you're buying. And as brokers, what's your advice to get things sold? And Justin, I kind of want to jump in with you first, because Austin, Seattle, they're very similar. We go through the same struggles right now. And I know Austin has been kind of, it's been putting along the last two years. Yeah. I mean, Austin has had a whirlwind of the real estate market in the last five years, right?

4:34Justin Hroch:COVID era, we got hot, hot. I mean, just insane numbers, low inventory. And it felt like, you know, every house was moving before it even hit the market. And so it's been quite like a shock, I think, to most people who are looking to sell their home now, because overall, like our market is like relatively flat and prices have just like compressed. I think I was reading the other day on Realtor that prices have compressed over 27 % in the Austin market and sellers just have like crazy misplaced expectations. from what was to what is now. And that's probably the biggest challenge that we're facing as a brokerage is just really helping people reset expectations to one, what is a healthy real estate market and two, what is their home actually worth?

5:22Justin Hroch:And Texas in general, I think is feeling a lot of that, right? There's some great policies that make our state great because there's a lot of builders who can build here. There's a lot of ways that we can create inventory within cities like Dallas and Austin. And so where we are now, really strong buyer's market. You know, in some sense, as a broker, it's been good to be able to slow down just in the sense of like you're not rushing to take your clients to go see a home. You're actually giving them time to look through, make sure it's the right fit for them and make a reasonable competitive offer with the sellers.

5:57Justin Hroch:So what do you see in like as far as like when you take things to market, what's the inventory that's trading? Like even though Seattle's market's not doing well, throughout the whole Northwest and the West Coast, there's like the affordability bubble. Like things at the top end aren't selling. But people are opting for more dated homes that are cheaper that they can put their sweat equity in. Those numbers are a lot different than the stats I just read off at 27 % more inventory. That's less inventory is moving. Like what's moving in that Texas South market right now? I would say that it is the homes that are affordable, but they're not necessarily the ones that are dated.

6:34Justin Hroch:Expectations that we set with our clients when they're going to list a home is that the things that are done well, the things that are done nice, those are the ones that tend to move. Because right now, I think in Austin, we have 116 % of sellers to buyers. And so literally every buyer who's looking for a home can have at least two to three options versus a seller who's looking for a buyer. And so the buyers have time to go and look and peruse and find the homes that they want. And what we're seeing is like, they're selecting the ones that are not dated, either slightly remodeled and, or just don't have a lot of deferred maintenance to them because, you know, they're, they have the option to choose of the different homes.

7:16Justin Hroch:And so they're going to go for what's better. So as a, cause you flipped a lot, you know, a good story about justice. We met at BP Con in San Diego. I think you bought me for a weekend. I did. Well, I bought you for like, like an hour session on zoom. And I was like, No, man, I paid too much for that. I need to need to come visit you. Yeah, they flew up and hung out. Yeah. But you know, I know you're doing a lot of flips. So like as an investor, you're broker, so you can kind of feel what's happening in your market. Like what does that tell you as an investor that you're focused on, on your strategy and what you want to buy?

7:47Justin Hroch:Yeah. So I mean, right now, I'm not doing a lot. So in the past, we did a lot of ground up construction, newer homes, like tried to hit the top end of the market, really expensive neighborhoods, trying to sell for a million and a half, two million. Right now, we've pivoted to trying to pick up in some of the tertiary areas outside of Austin, like Round Rock, Georgetown, Leander, where these homes, their prices have compressed quite a bit. But if they need to be cosmetically updated, we can go in there and spend$25 ,000,$30 ,000 and usually make probably a$40 ,000 to$60 ,000 spread. And so where we were kind of trying to play on the top end of the market when things were moving and interest rates were low, and we'd see spreads of$100 ,000 to$200 ,000 a pop, we're kind of trying to stay in that lane right now where we're hitting singles and making$40 ,000 to$50 ,000 every flip that we do.

8:40Justin Hroch:Well, it's quicker and faster and gets you in and out of the deal. Yeah. And that's the thing. like the cost of capital right now with rates where they are, it can really eat into a deal. That's what, you know, because when you sit there and you start drowning and you're on market and you're just racking days on market, it's, you know, especially if you're in that price point that you were in million to$2 million, it's, it's a four to$500 a day bill. Right. And that, that will erode the profit so quickly. And when you're in a slow market, you got to make sure that you can have velocity and move.

9:11Justin Hroch:Yeah. And that's like, like, that's, that's the target of what we're aiming for is like when we buy a home, we'll sometimes go in there. Like we picked up one yesterday. We went in there and it was a beater. We ripped out all the carpet, got it cleaned up, did some light drywall patch and put a new HVAC in. And we're turning around, putting it on the market as is hoping to make 30K on it just because we bought it at such a good price. And so we'll sell it, hotel it to someone who will pay us slightly more, but because we only have it for maybe six weeks, it's worth it to us rather than spending four months trying to do a full rehab on it to make an extra 20K.

9:48Justin Hroch:Yeah, just pivoting that plan. Because, you know, if you look at the Southwest in general, like Utah, Colorado, Arizona, they have some of the worst performance going on. Right. The Northwest and the Southwest is just not doing well. Like Denver has the highest price cuts in America at 31.4%. And Salt Lake City is third at 30.3%. And so like this rush south that we saw during the pandemic has slowed down. For sure. And it's causing a lot more price cuts and people just aren't pricing right out the gate. And so if you're in that south market, you want to just be careful about where you're going through.

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13:13Justin Hroch:Welcome back to On the Market. Let's get back into the broker panel. But that only really tells like kind of one part of the story of the South, because then there's the Southeast where Mike is. And that's a little bit different out there. There's like goods and bads going on. I mean, what are you seeing in the Southeast right now?

13:31Micah Mortag:So we're definitely experiencing kind of the same economic conditions. Obviously, we have higher inventory, definitely lower demand, but we're still transacting. We're having closings every week. It's very hyper local, especially like in Atlanta. it's a big city so it's really by neighborhood by neighborhood. I analyze every single month 120 zip codes and I pull data from RPR and I use this data when we're working with investors because we're very very very intentional now on where we buy what strategies especially with flipping. So we're looking at price trends because we don't want to buy a flip in an area where the prices are potentially going to go down, our inventory is going up.

14:14Micah Mortag:But overall, when I look at these 122 zip codes, it still says that Atlanta is technically a seller's market, which means our inventory is less than six months. And every single zip code except one on RPR right now, there's one zip code that's like 6.5 in Atlanta in our sub area. So inventory is going up. We definitely have a lot more leverage when you're a buyer. It's actually amazing. There's a lot more opportunities, but we're still transacting. So from a seller's standpoint, they still always want to try, right? So we're listing properties. They're taking a little bit longer to sell. We are inevitably going to be doing one or two price drops.

14:57Micah Mortag:We're never just going to get to the point and put it on the market for what it's worth. They're like, well, let's try. but eventually once we get it into the right price they are selling and we are closing it's

15:10Justin Hroch:just taking a little while well yeah i'm finding that a lot too like a lot of our sellers have overpaid for their home uh two or three years ago and life changed something happened divorce or whatever they're coming to us and they're trying to like recoup and um right what we're finding is like they're just having to take a loss on these houses it's like either hey you can rent it out or you're going to have to take a haircut of 50, 60 grand just to get your house sold.

15:34Micah Mortag:That's 100 % what we're experiencing in Florida. Florida's like hypersensitive to what's going on in the world. So like when it's good, it's good. When it's bad, it's bad. I feel like that's kind of like your Austin market too. The shifts are extremely dramatic. So the listings that we're putting up in Florida, unlike Atlanta, I mean, we're putting a no-up. They're not getting showings. We're doing price drops. We're doing every bit of marketing. We're doing open houses. We're doing everything we can and they're not selling. We have unlisted and relisted several houses in my North Florida market, which is Santa Rosa Beach, 30A, Destin.

16:12Micah Mortag:Miramar Beach has more inventory than I've ever seen. Right now, if you go into RPR, Miramar Beach inventory is 17 months inventory. It's flooded. It's a small area and the demand is just not there. So, which also means that there's a lot of opportunity there to scoop up some deals. South Florida, same thing. They're upside down. And it's sad. It hurts. I had a property listed in Sarasota, which isn't necessarily my market, but it was one of my investors I sold a property to a couple of years ago. He needed to sell it. And he's upside down. He's going to lose 100 grand. So we had to take it off the market.

16:46Micah Mortag:And now he's looking at STR options. He's looking at rental options. And so that's definitely what's going on in Florida. So Atlanta, again, we're still moving them. We're just doing price cuts. We're still getting showings. It's just slower. So Atlanta is consistent. That's one reason why I love to focus my investors into the Atlanta market. The numbers are better. The products are better. I think Atlanta is like the number one flipping market in the country, isn't it? Or Georgia?

17:13Justin Hroch:Atlanta is doing, I mean, the South, it's one of the strongest ones. It's one of the rare markets that had a rising list price at 1.2 % instead of people cutting. The listing prices are going up and new listings are down 10%. So there's less inventory and pricing still staying stable. Whereas in Florida, it's struggling. Like Tampa's down 6%. Price per square foot's down 5.6%. Price cuts at 25.5%. But then other parts of Florida, like Jacksonville, are doing really well. Inventory's down 16.9%. And days on market are down 10%. And so there's all these little pockets inside of each state that are moving.

17:52Justin Hroch:and then there's pockets that you want to stay away from. Michael, what do you see on the buy side? Because you do a lot of acquisitions. Because I just saw your face glow and you're like, oh, the buy side is a deal. It's like, well, what are you buying? And where's the opportunity, right? Because when the market gets tough, there's a lot more opportunities to buy.

18:08Micah Mortag:Yeah, no, it's super exciting for me. I love the market we're in and I'm weird. I'm always opposite of everybody else. It's like, we're struggling, we hate it. And I am beyond excited because there are a lot of investors in the Atlanta market and they're still interested, but we just have to be extremely, extremely intentional with where we're buying what. So if somebody says, hey, my strategy is flipping or my strategy is BRRRR or rentals, we first look at the data. I don't even ask them where they want to buy. We look at the data and the numbers and then we go look for inventory options in those areas.

18:41Micah Mortag:And this is something I learned from James. You can't wait for the perfect deal and dig for the perfect deal. You have to create the perfect deal. So a lot of these homes are sitting on there. The price doesn't make sense for what we're trying to do. But what we do is we find the areas that we want to buy in and we run our numbers and we write offers on all of them. And where we used to do that and we'd get declined or ignored, now we're getting people. I did five offers two days ago and two of the initial offers that we lowballed got accepted. And I'm like, oh no, no. I'm like, okay, we're actually under contract for two.

19:16Micah Mortag:We didn't ask for enough. Yeah, I was like, we were expecting counter offers. And like, I guess we should go look at them now because we're not even like running around Atlanta at 100 degrees looking at all these properties. So yeah, you know, there's a lot of like hidden opportunity. Again, something I learned from James, you got to look for different opportunities as far as like where you can subdivide a lot. And we're seeing a lot of that too. So if you look deeper, there's a lot of opportunity in Atlanta, which makes me super excited. I'm closing on one next week where it was a rehab. and the numbers worked for this house to be a rehab on this lot and then we realized that it actually was sold with the lot next door so we're getting two lots and one house for the price that made the the numbers work for just one house so the reason that they're selling the lot next door is because there there was an encroachment when they started to renovate this house they stopped and it were encroached on the other one and instead of fixing it and demoing it they just said oh we're just going to sell both so we're closing on this one next week and we ran all of our different plays we're gonna demo the encroachment i'm gonna make this house look less scary we're gonna go in there clean it out because there's water fire everything's living in there it looks like one of james's scary uh projects we're gonna clean it out and sell the project for exactly the same amount that she's buying both lots for so basically she's gonna have this other lot over here that we're gonna build a house on for free the new construction in that area is going for like 500 ,000.

20:42Micah Mortag:So definitely really cool place. You know, you would think initially that we would just renovate that house, but I'm like, no, the renovation on that house is going to be 150 ,000. Her margins are going to be better to just sell that and stay into the lot, which isn't normally what we do, but it makes sense. So yeah, a lot of different opportunities.

21:00Justin Hroch:Oh, well, it's also like her risk, right? You know, it's like you invest 150K into that project, like substantially higher risk than just kind of trading the property, taking the win. And I think that's like what we're trying to do as an investment group right now is just like, how do we stack small wins instead of trying to hit these home runs that we were able to hit a couple of years ago because the market was so active and money was so cheap. And, you know, you could hold a project for three or four months longer, two or three years ago, and it would still perform because the market was just going up and up and up.

21:33Justin Hroch:And so even though you were having more carrying costs, I mean, it was just appreciating every month that you like let it ride. And so right now that's gone. It's like almost like it's compressing every month that you hold a project. And so these smaller wins that we can trade just real quickly have been a real sweet spot for us to where we can pop off 30 to$50 ,000 every, every flip that we're doing.

21:54Micah Mortag:You're a hundred percent right. So the play on that one, while it made sense is if I put a reno project in Atlanta under 200, it'll sell in a minute. And I just put one on the market. I didn't flip it myself because I don't like this area. It's got a lot of inventory, a lot of days on market. It's just, it's not a nice area. And so I didn't want to sell it to one of my own investors. So I put it on the market at 195 ,000 in the first week. We have three offers, full price. I'm putting it under contract today. So that was the play with this double lot. I'm like, okay, she's buying it for$165 ,000.

22:29Micah Mortag:If we renovate this, it's$150 ,000 project. It's going to take months and there's going to be risk. There's going to be hold costs. It's not worth it. We can just sell this project for$165 ,000, make it look less scary after we demo and fix the encroachment. And she's into this one for free. So yeah, that's the play. And she's actually going to burr the other one. We're not even going to flip it. So she's going to build it and keep it. But it's exciting. It's definitely good in the Atlanta world. if you're an investor or an REI broker.

22:59Justin Hroch:And that's the important thing is you have to switch the strategy with whatever's going on in your specific region, right? The Southeast, the South, the Northwest aren't doing great. And especially in that expensive market. So how can you transact and switch up the strategy to work inside that? And that's about where the velocity is, what is selling more affordable because it's just too expensive for people. And it's really important to talk to your broker about what is selling, What's the absorption rate in certain price points and zip codes? Target those zip codes because, you know, I hear Seattle's bad, but there's certain price points and zip codes that are moving like crazy.