The Off Market - March 20, 24 Edition

Welcome to Off Market by Goliath Data

The insider's guide to off-market properties.

If you’re new here and wondering why you’re receiving this, it’s probably because you interacted with one of our posts on Facebook or Bigger Pockets. If you’ve returned for another edition, welcome back! As a reminder, we break down the latest real estate data, give commentary (and hot takes) on trending topics and provide resources to help you close more deals. Let’s dive in.

General Update

If you haven’t heard, we move fast. Really fast. This week we officially welcomed another engineer to the team and kicked off the search for a “Tech Lead”. We also booked tickets to Vegas to meet with a few top players in our space: realtors, brokers, wholesalers, flippers, and family offices. Next week we’re off to Florida!

On the product side, our engineers have been quietly building behind the scenes, they’re CRUSHING it. We pushed southern California and central Arizona live, and loaded eviction notices and code violations for a handful of counties. We’ll roll it out across the nation shortly.

Real Estate Data

Highlights

• 30 YR Fixed-Rate Mortgage: 7.11% vs 7.15% last week
• Mortgage Applications - Purchase: +4.68 % WoW, - 10.81% YoY (source)
• Mortgage Applications - Refinance: +12.19% WoW, +202.27% YoY (source)

Commentary: NAR Settlement Hot Take

What happened: the National Association of Realtors (NAR) announced a settlement with groups of home sellers, agreeing to end landmark antitrust lawsuits by paying $418 million in damages and eliminating rules on commissions.

Why it matters: The deal opened up the floodgates on competition, creating opportunities for new market entrants. We’re thinking it may do for real estate what Robinhood did for stock trading — bringing down (or eliminating) broker fees.

How things may change:

• Buyer's agents will likely require signed agreements before they show properties, reducing the number of unserious buyers.
• Listing prices may shift downward if buyers are required to satisfy the commissions of their agents. That said, lower commissions may be offered in buyers' markets to attract offers and higher commissions in sellers' markets.
• Buyers who refuse to pay commissions may choose to go without representation, which could lead to unfavorable outcomes in the long term.

**Real Estate Commentary (courtesy of Andreas Mueller) **

Shrinkflation

Inflation is normal, but now we have “shrinkflation,” where something appears to not be as expensive / the same price but the size of the offering is now smaller/less. Even the President is talking about it, bringing it up both during the Super Bowl and again during his State of the Union address. This topic has mainly been around consumer goods, “Hey my bag of Doritos is now 10% smaller” etc…. But you know what else is shrinking? New homes.

Housing Shrinkflation and Home Prices

Homes are getting smaller, well new homes that is. The median new home size is now 2179 sq/ft, down ~11% since 2013. However, we are seeing more townhomes being built, which often are smaller on average than a single lot / single-family home.

Yet prices are still up. Why you ask? Supply is low low low. High-interest rates body-slammed supply numbers in 2022. This was part of the “most significant home sales crash ever, and still, in 2024, home sales are trending at all-time lows,” says economist Logan Mohtashami. Active homes for sale normally average 2-2.5 million. Today, we are at less than half that, 1 million.

If we want to slow the rapid appreciation of home prices, we need more supply. The cost of homes, rent, shelter, etc… is still outpacing wages and most types of goods/services. We see this in the inflation data. We need to tame prices and to do that we need more supply.

Can’t we just roll back prices?

In short, no. And you DON’T want that. For home prices to disinflation back to 2019 levels, home prices would have to crash 41%. Millions of homeowners would then be underwater on their mortgage - owing more than it is worth - and would likely foreclose/declare bankruptcy, creating a credit crisis, leading to an unemployment crisis, and on and on…

What we want is for the rate of price appreciation (inflation) to level off in the 2-4% / yr range. That’s what the Fed is trying to do for total inflation (their number is 2% but that may be difficult for a while) by raising their Fed Funds rate.

Well all that sucks, What’s the positive?

It should be said that we are extremely fortunate here in the US. We have this thing called the 30-year fixed mortgage, primarily because of the structure of the mortgage market with government-backed mortgage securities. And since the qualified mortgage law in 2010, these loans have remained solid, and thus, so has the mortgage securities market.

Compare that to most of the other highly developed countries in the world, which have variable mortgage rates that suddenly change when the interest rates change. Imagine your mortgage going from $1500 to $3000 overnight. Gulp.

I don’t say this often, but good job U.S. Congress/government! So, unlike the 2008 Great Financial Crisis, today we don’t have high homeowner distress. This dearth of distress is another reason today’s home prices will remain elevated to stable, despite higher mortgage rates.

What could pierce the housing market armor?

Unemployment spiking up, it’s the great equalizer. This is why the dreaded recession is often talked about, it usually portends high unemployment, which is an economic killer.

Resources

Funding Your First Deal (Access Here)

So you’ve found a property owner who’s willing to sell, and now you’re wondering where you’re going to get the money to finance the deal. You’re not alone, that’s a problem most first-timers in the world of real estate face. The exact type of financing you’ll qualify for will depend on the deal you’re pursuing and the fundamentals of the deal. Generally speaking, most people will need to put down money of their own, but that’s not always the case. In some instances, you can get funding for all aspects of the deal: escrow, closing costs, deposit...etc. In this guide, we’ve broken down the common forms of financing, what they cost, and their ideal use case so you know exactly what type of financing to pursue.

The Closing Bell

As always, thanks for reading! If you need introductions to investors, wholesalers, cash buyers, or financing (EMD, double closes, rehab…etc.) you know where to reach us.

• Austin & Max

P.S. If you need an investor-friendly realtor in the Nashville area, Andreas is your guy! Happy to introduce you, just drop us a line!