What happens when there is no real estate inventory?
What happens when there’s no real estate inventory that Shana Acquisto, she’s a luxury real estate broker. We’re going to discuss this. The prices go up. Do people start remodeling? What happens are they’re less new builds because all the contractors are remodeling homes now. Oh, man. Pent up demand prices. Through the roof.
And even slower on new construction. Those are all things that are extremely probable when there is no real estate inventory.
And we have an article combined with interest rates. We heard that this morning. You know, that interest rates are or was it 4.7? We heard this morning.
I heard someone it probably wasn’t that. But before that had a 4.7. That’s pretty that’s higher than we’ve seen in a long time.
Yes, it is. So your article, article, article. According to Inman, it’s a real estate authority.
And this is what they have to say. Inventory usually, usually underlined rebounds in the spring. Not this time. Oh. Oh. So we’re going to go ahead and take a look. And what we have the inventory walk to the annual trend dropping month over month in February, despite initially borrowing, despite typically bottoming out each December before rebounding in the spring. So we’re in trouble. So it comes down to.
What do we do? What do we do during this time that there’s no inventory? Well, we have to get creative. You have to think of yourself as a real estate consultant and you have to get creative. The way of doing business before, I think is changing.
You’re not just set up a search. Hey. Yeah? You want to go see this property? Yes. It’s going to be much more than that. We’re going to have to get creative. You’re going to have to network. You’re going to have to find properties and create opportunities.
I want to be given.
Specifically about the underlying factors that I also see happening here when there’s low inventory. So the issues that I do see with low inventory is that obviously prices are going to go up because now all of a sudden we have, if there’s not it, scarcity situation, right? There’s still demand and there’s been pent up demand from last year because people couldn’t get it last year said out wait.
So now we have like years worth of people who are demanding right standing there wanting homes and they can’t get them, plus new people moving to the area, plus people in the area who just want to move because whatever those are. So prices will go up.
And I think what’s going to happen is all of a sudden there’s going to be more people that want to remodel their current home because they’re going to say, well, I can’t move, so I want to stay, right? So now all of a sudden people have to stay where they’re at and they start remodeling. Now imagine if all those contractors would have been on new builds.
Well, if they don’t have anything to build right now.
But it’s more of an issue of the contractors, too, because now when people are willing to pay the contractor more to stay in their home but to remodel it, then all of a sudden now those employees or contractors aren’t ready and aren’t available for the new build. Right? So now we have a slowdown in new builds because people are paying the contractors to fix up their current homes.
Right. And you’ve seen personally how hard it is to get contractors out there for remodels, but now people are going to willing to pay so pent up demand all over the place. And this article has a ton a ton of information about what’s going on here and percentages and what’s going what’s happening. And so by the end of February 23, so a year from now, the typical home is expected to be worth almost 400,000.
Yeah. What was it before?
No, I don’t know. I think it was 365 is my guess.
So Hannah asked a question, what would happen for that inventory to start going up? Well, that’s what they’re doing now. Their one thing is raising the interest rates. Right. So it’s going to it’s going to start to balance out all of this craziness that’s going on. People are going to be less cautious and there’s not going to be so many people, I guess, purchasing and moving around.
Yeah, I have no idea how that even happens. So the inventory to catch up is the supply chain has to get worked through the glut of people that currently demand to be able to move. This is like not a one year problem. This is probably a five year problem.
It is. But you know what I think is going to happen? I mean, I think what truly has to happen is you have to you know, people have to start changing their mindset on what’s happening. And right now, it’s a frenzy in our area, but we’re starting to see people kind of go outside of the area changing their thought process. Okay, I’m going to go out here, talk to somebody yesterday and she’s like, you know, I went through a whole year of of looking and. Trying to find the right place to build.
And you know what? I just went out I just went out almost to Sherman, and it’s like I got, you know, 15 acres out in Sherman and we built and it took some time, but now it’s like everything’s moving out there. So I think it’s changing a mindset.
And, you know, we’re all we think we’re flexible, but a lot of people don’t like change and they try to continue. You know, we had some people the other day, am I ever I’m moving back to Texas. Am I ever going to be able to find a home in Frisco or McKinney at this price?
And I said, I don’t think so. I think you’re going to have to change. And they were you know, they thought about it. And then over the weekend, we got back together and like, you know what?
You’re right. I started sending them things, showing them what opportunities they would have there versus in Frisco, price differences and coached and counsel them through. And they’re like, Oh, that’s totally fine. Where we live is way more important, right, than having an exact home in an exact neighborhood. So it’s interesting.
So Hannah asked some questions about what would need to happen. So we need to have the supply chain issue be fixed well, so that we can get the items that we actually need to build it, because there’s such a lag in what these items are and all these substitute goods that are going on. Right. That that creates a major, major issue and we don’t have enough people.
So we probably honestly need a change in immigration policy to let in more people to actually physically do the work because we don’t have them. And that gets to a deeper issue. When was the last time that you saw a young kid, maybe a school age kid, high school, and said, you know, my dream as a high school kid is to become a construction worker?
Well, it’s not because I think society pushes people to go in a different direction. To go to college, you have to do this. You have to have this job. Right. But there is a huge need.
Who is like I want to become an electrician, a plumber, a HVAC tech, I want to be a construction worker. And who’s who have you seen that said those types of things in the high school age? Right. And it just I don’t see that. So we’re not producing it here.
And that means we need it. Oh, for sure we have. We’ve talked about that for years and years that they just don’t you know, we are starting to see some of the schools come up with these programs that I think that they are super helpful. But yeah.
So contractors, you know, if you were to bring in like a day laborer day labor rate used to be that you could pay a person ten bucks an hour for 8 hours and, you know, give them a little bonus and give them $100 for the day. And that was like in 2000. So you could get a day laborer for $100 a day.
Typically unskilled, but just labor under bucks a day is about what it was in 2000. And then if you fast forwarded, all of a sudden it became $200 a day. So that was in like 2008. It became about $200 a day for a person.
Then it became $35 an hour, right? Like early in the pandemic for a typical tradesman or like just a laborer. And now I’ve heard that the typical relatively skilled so a little bit higher level is demanding $50 an hour and in a full eight hour workday or $400 a day for a typical tradesman. And so now we’re looking at standard is now $400 a day for labor and that’s to get them to show off.
And sometimes they want 10 hours a day or 12 hour day and then they’re less productive and they get that and they have to take a break and whatever. But their flat day rate would be five or $600 a day per person.
So that’s what labor is kind of went from in to. And to change that you have to have more labor, more supply.
So anyways, yeah, that’s kind of the status of what happened. You know, going back to it, I don’t see it changing any time soon. It’s going to be a it’s going to be a difficult year. Right. And it’s a hot, hot market which is supposed to be great. And it is but it comes with a lot of challenges.
In technology typically does start to change things, right. So they went from and there might be some minor innovations on the way things are. But I think as far as tools go, they’ve hit kind of max automation. There used to be a nail in a hammer or and then they went to like a screw gun where you had a drill and you could screw it. And then they automated that and went to the nail gun. And it’s like.
Maybe you’re going to see more like commercial buildings, right, than where they can in with just the whole the walls. Yeah, prefabricated.
So there are some different things that I do think are going to kind of have to happen because there’s different issues. So construction techniques are probably going to change. We did cover stuff a long time ago about 3D printed homes. Is that going to become a thing? Maybe, yeah. Right. Are you going to go to more construction where it’s block construction like cinder blocks and they fill it with with gunite and do it like they do in different places.
I mean, techniques may change to be able to compensate for this. People might go for a simpler structure where there’s not as much detail on it. So there’s a lot of different items that really go into this. And I see it as a five year problem to get worked through because it’s not like cities fast track things and make it easy to cities. Make it easy to get a new development in.
No, they don’t. Okay. So if during when there’s all this demand and they’re not making it easy because they don’t have enough people. Right. So how is it going to catch up any time soon?
So buckle up. Yeah, prices are going up and I think people are going to stay put. It’s a great time to become a remodeler. If you want to start remodeling homes, it’s a great time to start doing that, to become a tradesman, to paint, to do those things, to maybe like break a sweat once in a while.
So I’m sure you’re going to do.
No, personally not. Thank you. But it’s a great time to do one of those things, if that’s what you want to do, because there’s definitely the demand for it for the very foreseeable future. Okay, that’s.