Ep 84 – 2022 Crucial Market Update And Bidding War Winning Stories 

 April 8, 2022

HBH 84 | Housing Market 2022

What the hell is going on with the housing market in 2022 and how the hell do you get an offer accepted? What is a first time buyer to do? You may not like the answers you hear in this episode, but the truth shall set you free! Listen in as David Sidoni tackles some crucial housing market updates and shares stories of bidding war wins sprinkled with a heady amount of eye-opening truth bombs. Buckle up, bear down, and let the REALITY of real estate be your guide. It’s not going to be easy, but nothing worthwhile is. #Truthaboutrealestate
And if you need a pep talk, call 797-988-8410 to get one from a kindergartener. You won’t regret it, and it may be just what you need to keep your head up in this market.

2022 Crucial Market Update And Bidding War Winning Stories

Current information for First Time Home Buyers in the 2022 Housing Market

By the time you’re reading this, Will Smith smacking Chris Rock on live TV is going to be old news but the analogy of that event is apropos even though it’s not instantaneously topical. If you are buying a home in the competing market of 2022, you maybe thought it was going to be fun like Chris Rock hosting the Oscars, standing up on stage doing a live event and then getting clocked by Will Smith.
Will Smith, in this analogy, represents the 2022 housing market. That doesn’t make you feel bad enough. Not only does he smack you in the face, 2022 housing market walks, sits down, screams and cusses you out from their seat. Like Chris Rock, maybe you are sitting there trying to buy a house, smacked around and then going, “What happened?”

No Rules, No Tricks, No Hacks: Navigating The 2022 Bidding Wars

I’m here to help you navigate the home purchase process, making sure that you can dodge that Will Smith haymaker. You didn’t see it coming but it’s happening. 2022 truth bombs are coming your way. The 2022 home market buying updates, maybe you’re excited to know but I’ve got some answers for you, so let’s get into it.
The first update comes to us from TikTok. I’m trolling TikTok. Come find me at HowToBuyAHome. It’s fun. There was a realtor in another part of the country looking at $250,000 homes. That’s how I knew he wasn’t where I live. A $250,000 home hit the MLS. The MLS fellows are the multiple listing service and that’s where realtors post homes for sale. It’s got exclusive access and for licensed agents only. It provides information that is industry-specific, agent-to-agent stuff. Lots of times, we’ll get information there that you won’t see on the public sites.
Your agent can also set up a specific MLS search for you. That’s what this guy did. This buyer was getting their up-to-date information. That’s what the MLS does. You get the stuff before Zillow and Redfin. They take it all from the MLS. The agent says, “That’s cool, a $250,000 home.” That’s what my guy is looking for. They get that auto search alert, which lets them know they’ve got a home there in their buyer’s criteria.
They call the listing agent right away and make a reservation to see the home as soon as possible. The earliest they can do is get an appointment for the next day. They go home and go to bed. The agent gets up, goes to the office, prints out the MLS, all excited to get it ready for the showing he’s got that day and takes a look at the realtor-only information on the MLS. Here’s what the listing says.
The seller says she can only look at offers above $300,000. Remember, this was listed at $250,000. Please don’t waste your time if you’re below. She got harsh all of a sudden. We have offers in hand above $300,000 already. Please call or text to see if your price is even competitive. We had 150 showings and we’ve only been active for 24 hours. Whatever juice you thought you had going into a negotiation, it’s time to chow down some humble pie.
I’m stoked that you saved all that money over the last few years and you’re excited to come in a big, shiny, amazing buyer and the seller’s going to pick you. It’s time to know your role. The game has changed. You may have been a big knight, a rook or maybe a queen or a king but you’ve shrunk to a little pawn. You’re less than that. You’re half a pawn. I’ve never even seen one of those but I made it up.

[bctt tweet=”The economy has flipped and buying and selling anything has no one set of rules that work in every single market. This isn’t only for houses. This is for everything. The sooner you realize that there are no overall tricks, rules or hacks, the better.” via=”no”]

Unless your offer and buyer’s agent stand out to that seller, what this listing agent is telling us is you are merely an annoyance to the seller’s agent. That’s the incredible thing about 2022. You write an offer, good to go and excited. If you are not exactly in the top tier of what they’re looking for, not only are you not going to get a counteroffer may be and get the house that you want. Even worse, you’re annoying to the people trying to sell their house. That’s the reality of 2022.
Another story I heard is that a realtor representing a buyer tried to get their offer accepted on Friday. That’s a smart move because what they’re trying to do is get it accepted before the seller could show the home on the weekend to all the mobs of potential buyers coming in. They put in the offer at a competitive price with great terms and threw this in. If the offer is accepted by midnight on Friday, the buyer will contribute an extra $10,000 for the sellers closing costs.
This is great. This is a tip that I’ve given in the past, covering the seller’s closing costs. In the art of offering over what the house is listed at, which means you could go into over what the home could appraise for, it starts to get complicated. The buyer might be asked to kick in the gap between the appraised value of the home and your agreed-upon high purchase price.
Working these bidding wars in 2022, the agreed-upon purchase price is often well above the last comparable sales. The comparable sales are also known in the real estate world as recent comps. That’s because all the realtors are way too busy and things are moving way too fast for them to say the full phrase, “Recent comparable sales.” Recent comps, be fast and snappy.
Let’s say you offer $400,000 on a home listed for $350,000. The recent comps are all at $350,000. You might be asked to waive the appraisal, which means that if your $400,000 offer gets accepted and the appraisal comes in at $375,000, you got to come up with an extra $25,000 over and above your down payment and closing costs because the loan will only go to the appraised value.
That’s as high as they’re going to loan you money on it. You can’t decrease or move your money around. That’s as much as they’re going to give you. The rest needs to be cash. The reason for that is because the banks are trying to protect the risk and only going to loan to what is considered to be an appraised value from that neutral third party.
In this case, by offering $10,000 to the seller in the form of paying their closing costs, you can offer a purchase price of $390,000. It’s still going to net the same amount to the seller since they would have to come out of pocket for their closing costs in any other $400,000 offer. They may have netted 10,000 less on their price, but by paying $10,000 of their fees that they’re going to have to pay anyway to sell the home, you are netting them the same profit as other $400,000 offers. You are reducing your exposure to the appraisal gap by $10,000.
The extra that the buyer agent put on this $10,000 closing cost incentive is that they’re also offering this enticement with a Friday at midnight Cinderella stage cost, pumpkin clause. It’s to try to get the home for their buyer before the madhouse of all the other buyers crash on the home over the weekend. “Do what you got to do in 2022.” That is seriously going to be my new motto.
Here’s another one for you. I have no idea the legality or the exact terms of how this offer worked. I’m just reporting the news. I heard about this in my exciting life of trolling the world of real estate social media. When you’re trying to purchase a home, most of the time, buyers are like, “What’s going on with the seller?” I’ve been doing this for many years and have people all the time asking me, “Ask the seller what they want. Let’s see what we can give them.”

HBH 84 | Housing Market 2022
Housing Market 2022: Follow the smarties. When they’re waiting, wait. If they’re not waiting, they know something that we don’t.

That’s great if you’re the only offer on the plate but you’re not only the millionth offer that’s coming in. You’re the millionth person trying to go and look at the home. It sucks for you and many buyers, including some of mine. If you want to say to the agent, “We love the house. We want it. Ask him what it’s going to take to get the house. Let’s make sure we offer that.”
I don’t know what crack you’re smoking but that’s not happening. It might have worked in the past for your friend, aunt or parents’ purchase when they bought a house. That’s old news. The economy has flipped and buying and selling anything has no one set of rules that work in every single market. This isn’t only for houses. This is for everything. Supply and demand in the current economic situation control every negotiation. The sooner you realize that there are no overall tricks, rules or hacks, the better.
Everyone wants to find those things to make sure they don’t get cheated. It doesn’t work that way in a fluctuating economy. Unless the tools, tricks and hacks you found were newly formed based on the current supply and demand for what you’re trying to buy, not even just houses. I didn’t put out there, “Here are the perfect tricks to negotiate to buy a home.” I’d have to edit that thing every week and ask you to re-download it again. This works both ways against buyers and for buyers like it works for sellers. Occasionally, this can work against sellers, depending on the market.
Think about it this way. If you wanted to sell your car in 2021, when the supply chain decreased the inventory of cars, you had a whole new set of rules for how to sell your car. You got more than the blue book value. Why? That’s because the market had changed. You need to take the same mentality going into this market. In this buyer’s story in the 2022 housing market, the listing agent was not giving away any information to the buyers beyond the fact that the offers were well over the list price.
That is a phrase I can’t wait to never hear again. Understandably, they didn’t reveal exactly what it was going to take. They’re not going to reveal those numbers because of multiple offers and bidders. By giving little information, perhaps a few buyers would shoot for the moon and overshoot even what they thought was their top number to get the home.
If you don’t believe me, call me after you’ve written your 5th, 6th or 7th offer and gotten rejected. Tell me how you suddenly went 20,000 over where you thought you would never go. It happens. This buyer and buyer’s agent looked at the sold comps. They saw half over the list price of the homes that sold and realized it was a lot. They decided to offer $165,000 over the list price.
Your butt cheeks are clenched and you’re freaking out. This was a high-value home. How many of you think, “That’s crazy?” What they saw was that people had been closing homes $200,000 to $250,000 over the list price in this area. $165,000 over the listing price wasn’t even out of control. They wanted this house, so they still wanted to be competitive.
Here’s what they did. They added a different incentive and offered to pay a two-year salary to the seller. Talk about thinking outside the box. What that does is it reduces the appraisal exposure by the technical terms of buttload. It nets the seller some serious profit, not just at the sale but over time. If it sounds crazy to you, you got to know that in some parts of the country, I’m hearing offers going 50%. I heard one that closed 79% over the list price on luxury homes, $500,000 to $1 million over the list price for a $1 to $2 million home. That’s what’s happening in the luxury price range. It’s true.
As I always say, if you’re concerned about what you’re doing with your money on a $250,000 purchase, watch what the rich people are doing in the $1 million and $2 million price range. Are they going over the list price? Are they holding back and waiting for a crash? No. They’re paying 50% to 79% more. I always think those people at that price point who are buying houses have some knowledge and some smarts because they are in the position to buy a $1 to 2 million home.

[bctt tweet=”Life’s not fair, but the challenges that you overcome throughout your life are going to make you smarter.” via=”no”]

At some point, they had to know what they were doing to get themselves in that position. I once had a very savvy client of mine who could afford to buy a $3 million home back in 2009. If you haven’t studied your history, 2009 was a crap show. The real estate market and the stock market had dropped. Everything was falling apart. We were in a Great Recession.
He had plenty of money to buy a $3 million house but he asked me to find more rentals in the $3 million house neighborhood. That was going to cost him $6,000 a month instead of buying, which he could have done with no problem. I went into my spiel rent versus buy. You know what’s going to cost you $72,000 a year and wasted rent. He says to me, “Give it 1 year or 2. I’ll be able to get 1 of these $3 million homes for $2 million.” I’m in a position where I’m like, “I’m cool if I take the risk and lose $72,000 a year if I’m wrong.”
After I pooped my pants, I said, “That’s cool. It’s your money.” I helped him do it. Fast forward, years later, he was right. He bought one of the homes in that neighborhood. It was a larger home than his $6,000 rental for $1.85 million. 2 years at $72,000 a year cost him $144,000 in rent but he ended up buying a home at a discount for $1 million, $150,000 off. Follow the smarties. When they’re waiting, wait. If they’re not waiting, they know something that maybe those of us down here in the lower middle class, regular middle class, upper-middle-class don’t know.

Not Quite As Clean As A Whistle: The Truth About Buying New Builds

This brings us to our next topic, which is another thing I’m hearing. A lot of people don’t want to deal with the bidding wars. To get away from the bidding wars, they’re going to buy a new build, a new home. Plus, buying a new home means they get a new home that is as clean as a whistle. That means it’s time for another edition of, “Why do we say that?” Clean as a whistle? Why do we say that?
The old simile comes from a long time ago, back when things were pretty ugly out in the world. We took care of our discrepancies and disagreements in a little more savage way. It describes the whistling sound of a sword as it swishes through the air to decapitate someone. Why would I bring up a gruesome story? That’s because if you’re thinking that buying a new build is going to be clean as a whistle, I want to prepare you for some potential Marie Antoinette possibilities.
It’s not necessarily going to be that quick fix that you’re hoping about. Some buyers think that new builds avoid the big bummer in the 2022 buying process, avoiding the drama. It sounds super annoying to them. You think, “I get to avoid the pain twice. One, I get to skip all the bidding wars. Two, I don’t have to deal with the hidden problems since so many people buying resales are being told that you’re not going to get any repairs or credits after you do your inspection.”
The sellers might even demand that you even waive the home inspection if you want to be considered to even get the home. That home inspection gives you comfort and safety. They’re like, “The comfort and safety of buying a new home, without that money pit of a problem, sounds pretty enticing to some people.” Here’s the current market info on new builds in many areas.
Breathe deep, everyone. You are not going to like this. They have bidding wars too. I had a recent reader in Austin, Texas, get on a waiting list for a builder. This is the one that they liked. They found out that they were 63rd on a list with 85 names. I hate to break it to you all but in most areas, getting a new build is not a secret hack. You’re not the only one who figured this out.
Remember the inventory shortage is happening because of the builders not being able to build fast enough. They had pandemic stalls, lumber price increases and supply change issues. Though that issue is resolved, you can’t build a house in a day, so they’re still behind and in massive ketchup mode. There’s this little fun nugget. The ones they have completed got plenty of buyers ready to pounce. They’re doing lotteries for patches of dirt, not even a home began to be built there yet.

HBH 84 | Housing Market 2022
Housing Market 2022: New builds have bidding wars, too! In most areas, getting a new build is not a secret hack. You’re not the only one who figured this out.

While they build on that patch for 3, 6 or 9 months, they will and have done this. They get you to sign a contract and then find clauses in that contract that you signed with them, even with your deposit down. They’ll find a clause to raise the price during the construction that takes 3, 6 or 9 months because the market is pushing the prices up 3, 6 or 9 months.
In some cases, they’ll cancel the contract to give you your deposit back. Why? It’s because they’re builders and they figured out they can make more money giving you your deposit back and selling it to someone else on that list of 85 people. Here’s how that works. Let’s say you have a contract for the B model, lot number 14. It’s in the builder’s track and you put a $20,000 deposit down for a 5-month build.
Since you signed that contract and gave them the $20,000, they’ve had 85 people who are out there and got disgusted with the real estate market. They come in and sign up for a new build, a model B like you. They went on the builder’s waitlist. The waitlist will kill you. The builder calls all of the selling agents who are at the property and tells them, “The market’s going up. Call all those 85 people on the waiting list for the next 5 model B homes being finished and let them know that we’re going to have new homes coming out at a higher price and see who bites.”
One of those five homes is your home. They’re seeing if anyone else is going to buy it at that increased price. Monday morning, a month after you sign the contract, the builder calls all 85 people. They only need to get 5 of them to agree to buy that home at a $25,000 increase, not sure if they have to give you your deposit back that takes $20,000 out of their current profit but it creates a $25,000 increase for an expected new future, higher total profit.
What’s scary about this is I’m talking to all my unicorns all over the country. Even a supreme unicorn frequently cannot keep the deal together as the builders often refuse to do any amendments to that original contract when they realize they’ve got multiple people coming at them. They take that offer in the beginning phases of a build-out and then depending on supply and demand, they change it. If you’re 63rd on that list of 85, don’t think that builder is working as fast as they can to build more homes since they have a long waiting list.
Remember, they only have so many plots of land to sell and are playing an algorithm game. If the market’s going up, they’re not thinking, “Let’s keep building because we can make more.” They only have so many lots to sell. Their game is to get as many buyers on the list as possible and then carefully watch the market and try to time each release and each price based on how high they can jack up the prices without waiting too long, losing interest or finding a potential bump in the market where they have to sell for less.
They have deep pockets and can keep the investors happy by promising larger returns a little bit later on. They’re going to do a trickle release rather than dump all the homes all at once, sell them off but maybe leave some money on the table because the market’s going up. If only 5 out of 85 people on that waiting list agree to the new price, they’re going to resell the homes, release the deposit back to the 5 people that signed a contract and then work to build up another list of buyers for an even higher price point for the next phase release or maybe for that same release and do the same thing to the people who replaced you.

Bursting Your Bubble: 2022 May Not Be Your Year

I’m giving you a lot of information. I hope you’re taking it all in. With a lot of this, you’re thinking, “This sucks.” If you’re new to the show, at this point, you’re probably confused about the title of the show. You’re like, “The show says how to buy a home but it sounds a little more like, ‘How there’s no way you can buy a home?'” I feel you. Lots of people out there are trying to sell you. I’m trying to make sure you understand the entire process and realize how buying a home fits in best for what you are doing. Lots of people out there are trying to sell you a mortgage so they can pay theirs next month. That is not my jam.
My goal is to educate and empower you to buy a home when it’s right for you and the numbers make sense for you. For some of you out there, 2022 is the year that the universe decided that you should look into this but maybe not the year for you to do this. I may be discouraging and disappointing for some of you but I’m not here to burst your bubble if you wish you’d been able to do this years ago. We all do but we don’t have a crystal ball.

[bctt tweet=”Even if you don’t buy a home this year, you’re going to have learned the ins and outs of the market. You’re going to be a battle-tested warrior who, in the future, will be so pleased at how easy it is by comparison for you to decipher and take advantage of the new markets.” via=”no”]

I’m here to give you the reality of the current real estate market so you can enter into that feeling confident that you’re getting real information, not just a sales pitch. I’m confident that for some of you, once you run the numbers, jumping into the dreadfulness of the 2022 market will be a less sucky financial decision than for you to keep paying rent that is going to go up over the next few years. That’s why I’m delivering these harsh truth bombs.
The moral of the story is life’s not fair but challenges that you overcome throughout your life are going to make you smarter. Somewhere out there, there’s a buyer who turned 26 in 2012. Think about that. Where were you in 2012? Were you living in a dorm, doing keg stands and not even thinking about buying a home? Were you wondering who was going to ask you to prom back?
Maybe you were 26 in 2012 and have a seething disdain for me for not starting this show until 2019 and holding all this information back, Ala Adam Sandler in The Wedding Singer when his fiancée bails on him at the wedding and tells him the next day that she isn’t in love with him anymore to which he says, “Things that could have been brought to my attention yesterday.” People hate me but that line makes me laugh.
The reason why I’m telling you this is because, like you, I rented in my twenties. If you’re 36, I did the same thing and didn’t know any better but then I do know, so I’m telling you to use this information to move ahead. Let’s look at that 26-year-old buyer from 2012. After renting for four years before 2012 and a huge economic recession in 2012, he had his parents that got him, her, they to stop renting and buy a condo. That was good for them.
The buyer took the advice from the parents and bought a place. It was easy, with no drama. It was a buyer’s market. At the bottom of the market, they bought the home and it has been going up for ten years while they’ve been sitting there. It’s a great story for that guy. I wish I could do it for you but I’m not Doc Brown. I don’t have a time machine, although I do love DeLoreans. I cannot do that for you. This isn’t you. Deal with it.
How do you deal with this? Here’s a fact that might make you feel better for you. I can almost guarantee that if in your 20s, 30s or 40s, you learn how to navigate this challenging market, you’re going to have a far better understanding of how to take advantage of future markets. You’re going to be way smarter and savvier than that lucky 26-year-old back in 2012.
Where the good fortune of his parents not only giving him the advice in 2012 but also having the good fortune of being 26 years old of having his, her, their parents deciding to get freaky back in 1986, probably doing some tasty Bartles & Jaymes wine coolers and the sexy sounds of Jermaine Stewart singing, “We don’t have to take our clothes off and drink some cherry wine.”
Google that one. It’s ’80s gold. We don’t have to take our clothes off. Life is challenging. That’s why sing stupid songs to try to keep you uplifted. I heard something on TikTok, that I couldn’t believe. You can fix the algorithm so you get some decent stuff in your FYP. This is something I heard. “Pain is unavoidable but being miserable is optional.” Everyone, take a moment on that one. You’re going to benefit so much from this.
Even if you don’t buy a home in 2022, you’re going to have learned the ins and outs of the market, what you can do and what you can’t do. Someday the things that you will be able to do that you can’t do now, you’ll be able to do tomorrow. You’re going to be a battle-tested warrior who, in the future, will be so pleased with how easy it is by comparison for you to decipher and take advantage of the new markets.

HBH 84 | Housing Market 2022
Housing Market 2022: Basic supply and demand has moved prices way up a lot faster than everyone anticipated in the last few weeks. Homes everywhere are more expensive in March than they were even in January or even February 2022.

You’re going to crush that entitled lucky 26-year-old from 2012 who never learned to embrace the harsh realities of life and isn’t even close to being prepared to compete with your wisdom, smarts and financial acumen that you’ve accumulated here in the mud and the blood of the trenches of 2022. I was getting some national intel talking to my unicorns all over the country. I talked to one of my great unicorns up in Salt Lake.
She told me that she had to have a blunt discussion with some of the listeners that she was working with. Like me, sometimes you have to be Captain Depression, 2022 stats and facts and monologues. Knowing that she was coming from that good-intentioned place, sometimes you got to drop the truth bomb. They were getting discouraged at not being able to get everything they wanted as the prices continued to go up.
They even mentioned a bubble. She turned it around on them and gave them the new unicorn bubble talk. She said, “I need to burst your delusional bubble. The market’s taken off and we’ve missed out on the turnkey homes at $500,000. We need to make new decisions since you’ve seen all the options in all the homes that are out there. Are we going to be buying a turnkey $399,000 home with room to bid up or are you looking to get a $500,000 home that is going to need a little bit more work?” Pop the delusional bubble, just like that.

Predictions Gone Haywire: What The Hell Is Going On With The Market?

I do want you to be informed but let me give you some positive stories from the 2022 readers. I got this one where it’s like, “David, my partner and I had an offer to accept another townhome here in Atlanta.” That’s good for them. I got a lot of readers in Atlanta getting good things happening for them. They go on to say, “Given the sales price, we get to afford it but it’s still daunting. We wanted some reassurance that it’s better to buy rather than later. I get sick when I see relatively similar townhomes go for $25,000 or $50,000 less than some parts of town. I appreciate any words of encouragement.”
If they read the last few episodes, there are a lot of words of encouragement there but I wrote back to them and told them this. “Home appreciation has quickly skyrocketed since about mid-January 2022. With that, the data are slowly coming in. You’re going to see those old prices and freak out. I’ve seen homes jump 5% in a few short weeks. 5% doesn’t sound a lot if you haven’t been doing real estate for a long time and you haven’t done the math to realize how much 5% is on a $250,000 home. That’s a lot of money.”
“You’re seeing those homes $25,000 or $50,000. Your home that you’re writing an offer on at that new price is right in line with the rest of the country. No one can predict where it’s going to go from here. Basic supply and demand have moved prices way up a lot faster than everyone anticipated. Homes everywhere are more expensive in March 2022 than they were even in January or even February 2022. That’s likely to continue through the summer and the rest of 2022, even with interest rates going up.”
Why is it a fast and crazy jump in the market so early in 2022? Let me give you some of the data to back up all this craziness. Remember all the stuff that I reported to you at the end of 2021 and the beginning of 2022? “No, David. I don’t remember every show I read, especially not from months ago.” Let me tell you about it. All the forecasts from leading economists at the end of 2021 and beginning of 2022, said that 2021 saw that home prices had gone up an astonishing 19% per year.
That’s not normal. Ninety percent is insane. The average is 3% to 4% a year when you’re taking all the ups and downs. The predictions were that we would slow down to what is still a historically hot pace of anywhere from 7% to 11% for the entire year of 2022. Let me refresh your memory on the interest rate forecasts. At the end of 2021, rates were a little bit above 3%. The forecast was that they would slowly rise over the entire year up to 4%.
What happened? I’m here to tell you that it’s only March 2022 and all these forecasts have happened already. In January 2022, inventory for homes was so low that things went haywire. There were only about 923,000 homes for sale in the US. That was 19.5% fewer than 2021 and 40% lower than 2020. With that insane lack of inventory, housing prices increased at lightning speed, making all the year-long predictions for price appreciation, how much the homes would go up.

[bctt tweet=”If you need a pep talk, call this number: (797) 988-8410. It’s a school project where kindergartners give you a pep talk.” via=”no”]

All that happened in the first quarter of 2022, it didn’t take twelve months. It took 2.5 to 3 years. What about the mortgage rate increase? People freak out about a half-point or a quarter-point. I understand that it changes everything in your payment plan. Recent jumps have happened due to inflation, fed and all kinds of stuff. Taking a look at the rates, we’re up two full points, not a quarter-point or an eighth of a point, since the summer of 2021. It’s the largest jump in over a decade.
This isn’t because the fed raised their rates, even though that’s what a lot of people seem to think. The truth is the way it works is mortgage rates are not tied closest to the fed rate. It’s tied closest to the ten-year treasury bond. Bonds lose their value when inflation goes up. That’s where we’re finding the raising in rates. Bonds have been losing their value and that’s happening in 2022. Inflation is up big time. We’re talking 7.5% in March 2022.
What does that mean? The bonds are going to lose their value. We’ve seen it with the inflation, the gas, the groceries and the regular old expenses. They’re all going up. That affects that ten-year treasury bond and it loses its value. Mortgage rates go up. The reason why people think that it’s tied to the fed rate is that the fed rate has a plan to fight inflation. It raises the fed fund rate when inflation starts to run away. It’s the fed’s way of slowing the economy down. The fed is raising its rate because of inflation. Inflation is the cause of bonds’ lows losing their value. That is tied to the mortgage interest rates.
How’s that? Don’t lie to me. I’m giving this information to anyone who wants to understand. If you’re looking and trying to find the factors, this is the way the factors work. The fed rate is generally not tied to the mortgage rate. It’s tied to other borrowing money rates much more closely. In this case, because inflation is happening and the fed is raising it to fight inflation, that is changing the ten-year treasury bond, which is one of the indicators that is going to let you know where mortgage rates go.
To help clarify a little bit more about what the fed rate control, the fed sets a target rate for the fed funds by setting the upper and lower limits, on which banks then base their loans. That’s what the fed rate does. It averages the interest rates the banks charge each other overnight. That’s the effective federal funds rate crap you never wanted to know but since you’re buying a house, you should.
The federal funds rate is one of the fed reserves’ key tools for guiding US monetary policy. It impacts the EP-wise that you earn on your bank accounts and the rates that you pay on your credit card balances. That fund rate effectively dictates what they say is the cost of money throughout the United States. If you caught all that, great. If you didn’t, reread it, either for fun, clarity or torture. It’s your call but remember, knowledge is power.
With this knowledge, understanding and being able to watch all these different markets or hire someone to watch it for you and explain it to you or read the show, that’ll help too. If you’ve got all this knowledge, you can crush that 26-year-old from 2012 when you’re selling your first home in 2032 and trying to buy another home and he’s trying to buy the home too. They don’t have any clue what they’re doing because they’ve never been through it when it’s hard.
The deal with all this rate talk is when rates are low, it’s easy to pay off credit card bills or to borrow money to buy a house. Low-interest rates encourage spending. With demand for products being high, because we’ve got supply and demand and inflation problems, prices are going to soar. The goal is when the fed raises interest rates, it lessens people’s desire to spend and lowers demand on all these other goods, so it’s eventually going to lower prices overall. That could trickle down to the housing market.
That’s good news for you. I told you I was going to give you good news but then you were like, “I didn’t realize it was going to be wrapped in three minutes of CNBC finance talk.” The bummer is inflation’s got other bad news. It’s something that you should be aware of if you’re trying to go through this whole, “Should I buy a house?” process. It already sucks when you’re trying to fill up your gas tanker. Buy some groceries and have your butt handed to you when they tally up the total.

HBH 84 | Housing Market 2022
Housing Market 2022: This market is nuts. You can play behind the scenes and get yourself ready during all this psycho nest, so you can pounce when you’ve got all your ducks in a row.

This piece of bad news is some good assurance if you’re figuring out how to buy a house. It’s a positive incentive as you’re fighting this difficult fight to purchase in this monster challenging time. Guess what else inflation is pumping up through the roof? It’s an apropos analogy “through the roof” because it’s the roof that you rent. Rents are up 15.9% so far in 2022. Thank you very much, inflation.

Some Encouraging Words

The moral is this market is nuts. You can play behind the scenes and help get yourself ready during all this psycho nest so you can pounce when you’ve got all your ducks in a row. Here are some encouraging words from readers already hooked up with unicorns and in battle. It’s a few examples. “Thank you so much, David. The unicorn is super nice and knows Grand Rapids well. She got me a contact with a local lender that also assisted me with credit repair and those plans, should I need one. Once I catch my mom for a day, we’re going to be scheduling an appointment and talking about a cosigner.”
You never knew about that but it’s not for everyone. There is the opportunity for you to talk to someone about your plan and see if that is an option for you to move things quicker than maybe you thought. I love plans in motion. Here’s another one. “David, my partner and I had a nice long talk with our unicorn and are feeling good about her as a realtor for us. Thank you for taking the time to refer us to her. To be honest, I used the stress test questions you gave to interview a prospective realtor.”
I love that they thought they were calling themselves out. I’m fine with that. They continued. “She did great. We’re feeling very comfortable in continuing forward with her. Hopefully, we’re going to buy a house in the next half-year or so. I have to say the network you guys are a part of sounds like a positive approach to the field.”
I had to ask her why a realtor from Florida was being recommended by one from the opposite side of the country. It’s cool. It’s a unicorn nation. The whole unicorn thing falls out of the sky. I’ve been networking with realtors who worked the same way that I like to work in the scene, coaching programs, the ones that work by relationship, not just by transaction, not turn and burn.
At the end of this note, this reader said, “My partner was laughing that maybe she should leave her job and go work for their unicorn.” I love that. I told him that I’ve got several unicorns that I endorse. You don’t have to ask them the questions that I tell you guys to ask any potential realtor. The cool thing is, “Go for it,” because I trust these folks. They’re like-minded people I’ve been working with since 2005. It helps that over the years, I’ve weeded out a lot of the weenies and I can get you to a good unicorn.
Here’s one more positive story to help you get over all the crap I laid on you in the first part of this show. This one says, “Yes, I did it. Offer accepted under $200,000. I would’ve waited until tomorrow to send it to you but I know you might be up.” This is someone who reads the show and knows that sometimes I’m here in the middle of the night.
“I’m getting a rent back through June 2022 if the tenant stays there. Otherwise, we close by the end of May 2022. No more need to cancel my lease. It’s a 2-bedroom, 1-bath and the payment is $50 cheaper than my rent.” This home was under $200,000 but her new mortgage is $50 less than her rent. Everyone says, “The interest rates are so high.” You never know until you ask.
She’s s stoked because then she tells me, “The rent’s rising $100 if I signed a new lease.” She doesn’t have to. She said she could afford to live alone comfortably. There’s no need to rent out the room unless she wants the extra money. The HOA was only $300. For those of you who haven’t looked into it, that’s not expensive. Get ready for it. She said that as she was writing the offer, she’s been six hours reading the show to settle her nerves.

[bctt tweet=”Get mad at your parents for not procreating earlier so you couldn’t buy a house in 2012. Sorry, this is what we got. Let’s take advantage of it.” via=”no”]

“Thanks for your help. This is an incredibly stressful process. You made it easier. I couldn’t have done it without you. It all started with you, sir. If you thought I was going to stop reading the show, you’re wrong. I hope you’re doing well. Get ready to add me to your wall of success.” That’s the wall behind me. I got pictures of all my readers that have managed to purchase a home. This is a great story. This is the person who reached out to me and said, “I got a great job with Amazon. I love it but it’s a regular job. Can I buy a house?” I was like, “Let’s talk to a unicorn and run your numbers.”
She says to me, “Get ready to add me to your wall alone.” That means she bought it by herself. She’s stoked. She says, “I’m going to be holding a sold sign with a smile bigger than the one on my Amazon van.” If that story didn’t pick you up, things going to be tough when you’re out there and you’re like, “That’s a great story, Dave. What about me?”
I’ve got something else for you. If you need a pep talk, call this number, (797) 988-8410. It’s a school project where kindergartners give you a pep talk. I had some sellers that were selling their houses and the buyer bailed on their house. They lost the sale of their house and the greenhouse they were trying to buy with the proceeds from the sale of their house. It bummed me out.
I talked to my partner here at the show. He said, “Dial (797) 988-8410. Call them and a kindergartner will give you a pep talk. It’s awesome.” When one of your 2022 offers gets rejected because odds are it will call (797) 988-8410. Go through the dial prompts and you can ask a kindergartner to give you any different style of a pep talk. It’s awesome.
I’m not going to spoil the jokes because they’re good. When you listen, send me your favorite because I have one that was awesome. Run your numbers. Believe in what you’re doing. If you want to get mad, I feel you but get mad at your parents for not procreating earlier so you couldn’t buy a house in 2012. Sorry. This is what we got. Let’s take advantage of it. If you need more tips, check out the How to Buy a Home podcast YouTube page with full videos on the newer episodes. Some of the old ones are posted there too. Help us spread the word with comments, five-star reviews and even better, written reviews on Spotify.
Spotify’s doing reviews. Wherever you listen to the podcast, dump a review there, it helps. Follow David Sidoni on Instagram and find me on TikTok at HowToBuyAHome. I’m there, dancing. I’m getting stupid. The point is, I’m trying to reach everyone before they listen to other people on TikTok, telling them horrible advice. Let’s get the conversation started and help people out there scrolling through those trending videos, trying to find the one place where they’re not going to get trending topics for first-time home buyers. They’re going to get my truth bombs on real estate.
We know people are listening out there on TikTok. It’s time to get the truth from someone who cares about them and knows what they’re talking about instead of the dude that went viral for no reason. Remember the three PS when you’re trying to buy a home in 2022, Patience, Persistence and Perseverance. If you feel like Will Smith and you’re getting the urge to go for that fourth P, Punching people, chill out, mellow, unwind, take several seats, ease off, and show some restraint, no punching. Try this P, Planning and then you can do this.

Important links

This podcast was started for YOU, to demystify things for first time home buyers, and help crush the confusion. After helping first timers for over 13 years, I knew there wasn’t t a lot of clear, tangible, useable information out there on the internet, so I started this podcast. Help me spread the word to other people just like you, dying for answers. Tell your friends, family, and perhaps that random neighbor you REALLY want to move out about How to Buy a Home! A really easy way is to hit the share button and text it to your friends. Go for it, help someone out. And if you’re not already a regular listener, subscribe and get constant updates on the market. If you are a regular and learned something, help me help others – give the show a quick review in Apple Podcasts or wherever you get your podcasts, or write a review on Spotify. Let’s change the way the real estate industry treats you first time buyers, one buyer at a time, starting with you – and make sure your favorite people don’t get screwed by going into this HUGE step blind and confused. Viva la Unicorn Revolution!

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You Might Also Be Interested In:

Ep 217 – Interview With Millie – How To Buy Your First Home Before Turning 30
Ep 218 – Interview With Brian Friedman – How And Why Creatives And Artists Should Buy Instead Of Rent
Ep 215 – That ADU Guy Interview – The Ultimate House Hacks To Make Buying Affordable
Ep 216 – PMI Is Still A Privilege And Still Not The Devil