Trump Just Stalled the Biggest Housing Bill in Decades

Dave:Mom and pop investors are dominating the housing market despite all the negative news out there. President Trump just declined to sign the biggest housing bill that passed Congress in decades and housing demand is a surprisingly bright spot for the housing market. Today we’re hitting these headlines and more to make sure that real estate investors understand everything that’s going on in the market. This is On the Market. Let’s get to it. Hey, what’s up everyone? I’m Dave Meyer. Welcome to On the Market. Today I am joined by Kathy Fettke and James Dainard. Henry’s off big time in us, just ignoring us. Can’t even show up for recording anymore, but I’m happy to have you both here. Kathy, how are you?

Kathy:I’m good. I’m excited. James wants to bring a happy show to us today. No more sad clowns.

Dave:I like it. I feel like some of the shows we’ve done recently have just been so depressing over. When in reality, things aren’t that bad. They’re not 2022, but there’s good stuff going on and we have a couple good stories to talk about that today. James, how you doing, man?

James:I’m doing good. I’m done filming. I got two more days and done. I feel like a butterfly. I’m so light right now.

Dave:So good.

James:I

Dave:Can’t even imagine what you did filming three seasons for A&E in what? Like a year and a half?

James:Do 18 or 24 months.

Dave:Oh, that’s brutal. But the show’s awesome. If you guys haven’t watched it, go check it out. It’s called Million Dollar Zombie Flip. I think they’re airing season two right now. I’m on episode eight. It’s ridiculous, but James and his team do such a good job with this. Definitely go check it out. I genuinely mean this. It’s the most fun flipping show I’ve seen.

James:You know from that episode, I got a rash that wouldn’t go away for a month.

Dave:I love it.

Kathy:Okay.

Dave:With you, I don’t know if that means you’re sad about it or you’re proud of that. That might be a badge of honor for you.

James:It is.

Dave:Well, let’s get into our story today. James, you said you have a happy … Let’s start with a happy story. What do you got for us?

James:It is amazing to me how quickly people’s attitude and perception of everything switches so fast now, but there’s just kind of a lot of sad clowns out there. It’s like the world’s ending or it’s like they’re walking around with a rain cloud over their head all day long. It’s

Dave:Charlie Brown.

James:It is Charlie Brown. Yeah. I’m like, “You guys, you got to look at the facts. And Housing Wire had article, housing demand holds steady as regional inventory trends reshape the market.” And what this article talks about, and I don’t think this is a hundred percent telling the full story either because I think the market has slowed down in a lot of sectors and you got to kind of sit there and grind it out. But what the article does point out is that demand is broad, it’s not concentrated, but the national inventory is actually really flat year over year.So on the inventory, national, it’s only up less than a quarter of a point. Midwest is up 5.5%. The West is down 2.8% and the South is down 0.8%. So inventory is not skyrocketing. And what I think what people really got to look at is what is the median home price in your market? What are things selling? Because there’s a lot of little segments that are not moving. I’m in some deals where they are not moving and that’s okay. I got to wait it out and time it out, but all this inventory is cranking up and that the market is coming apart. You have to look at the actual facts. And I broke down a market inside Washington because I’m like, okay, this does not tell the whole story. This is about two weeks ago I broke this down because I’m like, I got to see what this is.And I think this shows a very good snapshot of the rest of the country too. There’s two different markets going on at the same time inside of our market. There is the luxury market, which anything above three million inventory has extremely increased where we’re at levels in Bellevue and Clyde Hill at over 10 months of inventory. But if you back into the more median home pricing, we’re down on inventory.

Dave:Yep, exactly. Affordability, baby.

James:It’s all about affordability. And I mean, being a luxury flipper, it’s just great, let me tell you, but you have to look at it because the important thing is to look at the actual facts. That does tell a story throughout and because I’ve seen people cut price, they’re getting very irrational with their investments. It’s like, no, you were hitting a slow time of the market and you have to just slow down, look at the facts. Now, if everything’s down, that’s a major concern, but they’re just little segments that are down and slowed

Kathy:Down.

James:And typically if everything doesn’t slow, something will get some legs on it and get running back again. And so you just got to be patient and build out your strategy to have a lot longer hold times. But that’s what I liked about this article. It’s like, “Hey, this is not really what everyone’s saying. It’s just that certain segments of the market are not doing well.”

Dave:Yeah. I think all the evidence shows that things are better than people make them out to be. And I said this on a show recently, this is a bold statement, don’t quote me on this, but to me it feels like we’re sort of finding a bottom of the residential market right now because if things didn’t get that much worse this year and we didn’t see demand evaporate in the last six months, and in fact, we’ve seen demand go up over the last couple months. If you look at mortgage purchase applications, if you look at pending sales, they are up this year. And so if we’re four years into a tightening cycle, four years into low affordability, we saw mortgage rates go up 0.5, 0.75% this year. There’s all these fears about AI and more people are trying to buy a house this year than last year.I’m not saying things are going to get better quickly, but I think to me this just shows that absolutely we’re not in a free fall. People are still participating in the housing market, still want to participate in the housing market. And personally, I think it’s going to take a while for it to get meaningfully better. But to me, this just shows that we’re at a position and a place in the market where you as an investor can make decisions. It’s stable and that’s as an investor all you need. You need some level of predictability. There’s never perfect predictability, but some level of confidence that the next three, six, nine, 12 months are going to go somewhat similar to what you think it’s going to happen, or at least you have a backup plan. And to me, what the data James shared shows two things. As a flipper, like James, the disposition is challenging but it’s not getting worse.And I think a lot of things are showing that it might be getting better. And as a buyer, there are good deals, but don’t expect some free fall where inventory is going to skyrocket 10, 20, 30%. All of a sudden you’re going to be flooding the market with deals, you’re going to be shooting fish in the barrel like it was 2010. So no, it’s not perfect, but it’s more stable and that’s all you need to make good decisions.

James:And that’s why you got to look at the … Pending sales are up.

Dave:Yeah. I feel like everyone’s freaking out. That’s a very encouraging thing about the market

James:Because the conditions are not great. Inflation’s high, things are expensive, but pending sales are up. Midwest is up 9%. The West is up 8.4%. The South is up 6.9%. The Northeast is up 4.1%. The world is not falling, but you do have to do the research to what is safe and not safe. That’s the thing.

Dave:Of course.

James:Not everything fits in the same bucket and everyone throws everything into the bucket when they’re going, the market’s terrible. It’s like, we’re still selling homes with multiple offers and then there’s some that are crickets. And so you want to look at what’s the absorption rate, where’s the velocity in your market? And that’s all I want to buy right now. I just bought a very expensive flip and I think people are thinking I’m crazy because I’m like, well, it’s expensive, but my target ARV, it’s 4.3 million. It’s the affordable part in the market for this neighborhood.

Dave:I would love that to be the affordable part of the budget. That would be great.

James:But the new neighbor’s house next door is listed for eight million bucks.

Kathy:Oh, wow.

James:And so that’s where you want to be is that affordability, but just because if you just interpret the surface, you end up sitting out and you miss some really good buys during this time. And so you got today balance and arm yourself with facts or you just lock up and you lock up, you don’t make any money.

Dave:All right. Well, I love it, James. Great positive story. Thanks for sprinkling us with some good news today. I always appreciate that. I’m not trying to be all Pollyanna about it and say that everything’s perfect. It’s not, but it’s not as bad as people think. And if you can find those pockets of strength, there’s opportunity there. So make sure that you’re staying diligent, looking at the market, understanding your market all the time. That’s how you profit and succeed in this kind of environment. All right, that’s our first headline. We have two more for you talking about how mom and pop investors are dominating the housing market. That’s another positive story. And we’ll also talk about the bipartisan housing bill that passed Congress this week, but President Trump has declined to sign. We’ll get to those right after this quick break. We’ll be right back. Welcome back to On the Market.I’m here with Kathy and James going through this week’s headlines. Talked about a bright spot in the headlines that James brought us before talking about how inventory and pending home sales, not as bad as people think. There’s actually positive trends in a lot of those areas. Kathy, give us something else a little more positive. We’re just staying on the happy

Kathy:Train

Dave:Today.

Kathy:Yeah. Happy clowns today. That’s all we are. It’s a big, big clown party. I’m

Dave:Going to be a sad cloud, but let’s keep going.

Kathy:Okay. Well, mine is from realtor.com. I think it’s a great headline. Mom and pop investors are dominating the housing market and Wall Street is backing out just as Trump steps in. So this article was super fascinating. Basically the sale of homes to investors ticked up slightly to 11%, just 0.3 percentage points. So not a ton, but what’s interesting about it is investors bought 534,000 homes last year and the median investor purchase amount rose 5%, but collectively it was the small investors, not Wall Street. Small investors accounted for two thirds of all of those homes that were purchased. Large investors are down almost 70% from 2021. That’s amazing.

Dave:Wow. That’s on single families down 70%?

Kathy:Yeah. Large investors and Wall Street investors, basically defined as those who own 350 homes or more. The article said it doesn’t necessarily tie to Trump because they don’t have those numbers yet and the 21st Century Road to Housing Act, which you’re going to talk about in a minute.

Dave:I will.

Kathy:Because I’m not sure that the numbers reflect that yet. So it’s just interesting because again, coming back to what James’s article was about, people are like, “I can’t find cashflow. There’s no deals. The prices are high and mortgage rates are high, nothing cash flows.” It’s like apparently there’s a whole lot of investors who don’t agree.

Dave:Yeah. Still doing stuff.That’s

Kathy:Right. It’s still doing extremely active.

Dave:Does it say, Kathy, the split between flipping or rental, does it say anything about

Kathy:That? This is one of the things I don’t like about these stories is it’s not specific, but at the very end it talks about flipping. So the last sentence says that real estate analytics from Adam found that the typical profit for flipping a home is rebounding this year. So it’s not clear, but it’s interesting because you don’t see a lot of the Wall Street investors doing the flips. So it’s like, is it talking about buy and hold or not? How do they define investors? Is it people who bought with a LLC? How do they know this and it’s not really clarified in there?

Dave:Yeah, they all do it differently and they’re not perfect. But if you look at Redfin does this, Adam does it and the direction is the same so I think it’s right. It’s probably not precise but directionally accurate. I’m not surprised at this at all to be honest. D either of you know any investor who’s been active the last few years who’s just stopped investing?

Kathy:Not in my world.

James:Yeah, maybe not actually. Everyone’s actually still looking.

Dave:Yeah, right. I guess maybe volume has slowed down because volume has slowed down everywhere. That is true. If you look at these reports, they show that investor activity is actually down, but proportionally investors are making up more and more of the housing market, but it’s not because they’re buying more. It’s not this media narrative that investors are going out and buying the most. It’s actually that homeowner buying has just gone down even more than investor buying. And so proportionally investors are making up more and more. And I just think anyone who sees real estate as a long game sees this as a buying opportunity. And maybe there’s a lot of trash out there. It’s still bad deals, butIt’s worth looking and people are finding stuff and there’s going to be more and more of that. Even though what we talked about with James, even though the fact that inventory is relatively flat, I personally just think the amount of distressed sellers, people who don’t want to put their home on the market, sell them on pocket listing, sell them off market is just going to keep increasing. And that’s the opportunity for investors. I mean, even on market deals are getting better, but there’s dual opportunity here. So I think it’s great that people are still out and buying. Hopefully they’re doing all their underwriting correctly and they’re being disciplined about their buying. But if you’re doing that and you’re patient and you’re willing to look at 40 deals before you pull the trigger on one, there’s good ones out there.

Kathy:Oh yeah. And again, like I said, buyer’s market. So I imagine that the investors doing this are going to the buyer’s market where there is more inventory and they can negotiate and the people who are selling in a slow market are maybe a little bit more desperate. But the article goes on to say that the Midwest and the Sunbelt are the most popular destination for the investors with Memphis having the highest share, 23% of market activity, then Kansas City, then St. Louis, Birmingham and Oklahoma City. So interesting. All

Dave:Cheap spots.

Kathy:A litle bit more forable. Surprised in any

Dave:Of those. Yeah.

Kathy:Yeah. Yeah. So it’s again, opportunity and people focusing on areas. It also says the Sunbelt though, because in the Sunbelt we know that, and the article says this, that the demographics show the area is still gaining population, but it’s on sale. So investors who see that, it’s like, that’s my dream to go into an area with population growth, job growth, yet the prices are down, there’s going to be that boomerang. That’s my thing.

Dave:That is a no-brainer. Find a good house, but that’s a no-brainer kind of market.

James:And I have seen some people, you know where I think some of this is coming from too, because I do know a lot of Bitcoin bros, they’ve been kind of going out of Bitcoin a little bit. And then also I’ve seen stock investors also starting to make some kind of safe, steady investments. They’re not going for the big kicks, but they’re just trying to move their money around a litle bit.

Dave:That makes a lot of sense. And for all the fear about AI, the stock market’s just ripping. People have money. People who are invested in equities have money. So keep doing what you’re doing, everyone. We’re helping prop up the housing market.

Kathy:People hate

Dave:On real estate investors rescued the housing market in 2011, 2012. It was investors who set the bottom of the market back then and got the market growing again. And although we haven’t had a crash, I think investors are helping set the bottom for inventory and activity and pending sales and demand. And I’m glad that small and pop investors and not institutional investors doing that. So good on our community for continuing to work on your businesses and move forward despite challenging conditions. You guys rock.

Kathy:And I want to give a plug for BPCon because I’m going to be talking about how to increase cash flow in this market. And I’ve got so many ideas. I’m very excited. So is there still good deals on tickets?

Dave:Oh yeah. We still have … Well, by the time this comes out, I think like one or two more weeks on early bird pricing. So go check that out. Also, if you want a discount, hit me up. I get a limited number of them every month. You can DM me on Instagram, but they’re the cheapest they’re going to be. So definitely go get your ticket. I’ll be speaking. James is speaking. Henry is speaking. We have Morgan Hausel as our keynote. I’m pretty stoked. Last year we did a little on the market meetup. It was super fun. Maybe we’ll do that again

Kathy:At

Dave:The conference too where we just talked about the economy like nerds for a while. But it’s in Orlando. This October 2nd through 4th, you should go grab your tickets. It’s going to be a lot of fun. All right. We got to take one more quick break. After this though, we’re going to talk about the housing bill that passed overwhelmingly with bipartisan support this past week, but President Trump has declined to sign so far. We’ll give you an update on that right after this break. Welcome back to On the Market. I’m Dave Meyer here with James Dainard and Kathy Fettke going over this week’s headlines. We had some positive news and you know what? Today my story, I’m going to spin it positively. We had the biggest housing market bill past Congress with bipartisan support over the past week. It’s called the 21st Century Road to Housing Act.And we’ve talked about it on the show before because this is something that’s been in the works for a while. It’s I think been negotiated over 10 months with, again, overwhelming bipartisan support. I forget the exact numbers, but it was just like a massive margin. Everyone supports this and there’s a lot of good provisions in there. Everything from giving access to affordability programs, helping community banks lend more, making manufactured and prefound housing easier to finance and to build, streamlining environmental reviews. There’s a lot of good stuff in there. But this week and a lot of fanfare is very dramatic on Wednesday. President Trump canceled a signing ceremony for the bill. Now what I hear and what I’ve read about what’s happening here is that there’s no objection to actually what’s in the bill. The President and the White House have actually signaled support for the bill throughout the negotiation, but President Trump wants the SAVE Act, which is an unrelated voter ID focused act to pass.And he’s, I mean, frankly, just using political leverage or maneuvering to try and hold up this housing deal to get this other deal passed. I’m personally hopeful it will get passed. Everyone wants it, right? I’m curious what you guys think. Do you think this will get enacted? And if so, do you think it will make any difference?

James:I think it’s going to get passed. I think this-

Dave:Me too.

James:Yeah. I mean, I think in this world, everything’s a political bargaining chip and people just can’t do what they think is right. Because I actually do think that Trump does believe in this billAnd he believes in a lot of the components of it. And that’s the shame is past the thing that you believe in and then work on the next battle. Everything should not be blended together. But I do think this will get passed. I know people were kind of mad about this and I get it too. I’m like, “I think this is going to have some benefit to the housing economy.” And I think that this will be passed within the next 60 days at late. It will be done because he didn’t say he’s not signing it, he just canceled the signing.

Dave:Right. He has not officially vetoed it, which is, I think, really important. I learned about this the other day. I was going on the news to talk about this and they were like, “Do you think it will pass?” And I was prepared to give my opinion and they asked me some parliamentary process questions about it. So I looked this up. So basically the way it works is if the Senate sends the bill to Trump and he does nothing, it actually goes into law after 10 days, but the Senate has to formally send it to the president, which I don’t think has happened yet, but he has also not vetoed it, which I think is why there’s hope that it’s like he’s not saying, “I’m never going to sign this. ” So we’ll see how this works. But Kathy, curious your take. What are your thoughts?

Kathy:I don’t actually think it’s going to make that big of a difference. And I think in some ways it could be negative.Oh, really? Could be not great for housing. Yeah, because sure, we want more homeowners. Home ownership creates stability and wealth. Obviously, we would love everyone to own a home. However, there are people who will never own a home. They don’t want to own a home. There are renters in this world and they deserve a home just because they rent it and don’t own it doesn’t make them less valuable. And so this actually upsets me a litle bit because I believe in the renter and the people who maybe they travel a lot and they’re going to only live in an area for a couple of years and they need to rent or they just would rather not put a down payment on the house and put it somewhere else. So it’s just assuming that everybody we’re just giving more weight to the homeowner and taking away some of the investor activity that would provide more rental housing.That’s just my opinion on it because yes, I am one of the people who has a single family rental fund and we have provided affordable housing to renters and we love renters.So it’s upsetting to me. It just feels unbalanced and unfair because renters matter too. That’s just my thought.

Dave:How do you think this is going to hurt renters? Because people are still allowed to do build to rent, for example. So

Kathy:What’s

Dave:The mechanism for that?

Kathy:Well, an example is with our fund, we buy older homes, fix them up to very safe conditions. These would be homes that a homeowner couldn’t buy because they’re problematic homes. And so we’re able to buy them, fix them up and create affordable housing. This is what investors do and we’re good at it. So now you’re saying, oh, the really, really good ones don’t get to do it anymore once you have a certain number of homes. And so we’re limiting- But I

Dave:Think there’s a provision for that. They allow you, they have built to rent carve out and a renovate to rent carve out. Maybe I’m wrong, but I thought they did add that into the final bill.

Kathy:I hope so. Yeah, I hope that’s the case. So then it’s limiting funds that are buying homes that are new or

Dave:Renovated. It’s stabilized. Yeah, it’s stabilized. But actually even investor to investor purchases are allowed too. So it’s really just looking at stabilized inventory on the MLS is like that’s the way I interpreted it at least.

Kathy:Well, I obviously need to study it more then.

Dave:No, it’s confusing. And I read it and I’m still confused, but that’s how I interpret it, but I could be wrong.

James:Yeah, because I think the bill’s targeted more. Kathy, what you guys are buying, that’s not really what these big guys buy in. They buy brand new homes that are direct competitors with first time home buyers and they go in deep into some neighborhoods and will tranche out a whole neighborhood. And the reason I don’t like that approach too is they can actually control the equity levels too, like how they sell so they can manipulate the market a lot more. I think this is going to help. I don’t think it’s going to have a huge difference for a lot of buyers out there right now because I mean, the big problem is that it’s trying to help address is people just don’t make enough money to buy the home.

Kathy:That’s the thing.

James:Yeah. One

Kathy:Of the proposals in California was like if a house goes on the market, it needs to give the individual home buyer three months or whatever to be able to buy that. Yeah, I saw something. If it’s sitting on the market, then an investor could come in and buy it. I totally believe in that. I always, since 2012 when investors started to dominate the market, it was very upsetting because I would see people get outbid by institutionals and very upsetting. So I thought that’s when it came up in California. I don’t think it ever passed, maybe it did, but that at least the homeowner gets a three-month advance to buy that house. If it’s still sitting, then it should be up for grabs for anybody. And maybe there’s another rule that says you can’t have dominance in a certain market. There has to be a limit to how many investor homes you buy in one certain market so they don’t control it.But I just think limiting the number and again, I would need to look closer. The other thing about the bill is it’s not really addressing local districts. And I could tell you just in my market in Malibu, it doesn’t matter. The locals are going to control the way things work. So unless this law would influence the local city planners more than it would work, but I’m not sure it does.

James:I agree with Kathy on that. There should be a lockout period because if some reason nothing’s selling, let the guys stabilize the market. I remember in 2008, especially with that nine and 10, with that first time home buyer credit people would get the rebate backA lot of HUD housing and HUD housing still does this to this day where you can’t bid on this for 21 days or 30 days if you’re an investor. It can only be for owner occupied. And then what happens is the cleaner ones get absorbed, but then the leftovers are the ones that aren’t financeable or have issues. We get to then jump on it. And I do think those little check marks are helpful. Those little roadblocks is like, hey, let the buyers look at it, go through their process. And if no one wants it, at least then someone can go pick up the inventory and you don’t get these zombie houses sitting vacant that are just abandoned. I

Dave:Actually kind of like the idea of a lockout. I don’t know. I would have to think about it, but just on paper, that kind of makes sense to me. And as a seller, you would not want to limit who is able to buy-

Kathy:Who’s your buyer? Yeah. Exactly. If you’re not selling someone, come buy it. And that’s been an issue for builders. A lot of homeowners can’t afford it. So let an investor buy it and provide rental housing, which is so needed.

Dave:The part of it I really do like is I do feel like for the first time on a national level, we’re seeing supply side legislation. So much of it

Kathy:Is

Dave:Demand side where you’re trying to make it more affordable by giving down payment assistance or tax credits, which help, but they’re bandaids and actually kind of make it worse in the long run. If you stimulate demand, it pushes up prices. And so it helps people right now, but a year or two, five years down the road, it makes prices worse. And so that could be a temporary solution, but the long-term solution is to build more supply. And although this bill is very far from perfect, the idea is to build more supply. And I think just that in itself is a step in the right direction. The fact that they’re talking about streamlining environmental review and I totally agree with you, Kathy, 90% of what actually happens is going to happen on a local level,

Kathy:But

Dave:The government is offering incentives and recommendations at least. Will they do it? Probably not everywhere, but it’s a step in the right direction, I think. I love the idea about manufactured and prefab housing. I think there’s some really silly restrictions that help no one on those. Great way to bring down cost of construction. Those are kind of things that the federal government can do even though everything zoning challenges, environmental reviews, that happens at a local level, but these are the little things that they could do. And there’s 50 provisions in here. It’s kind of a throw everything at the wall. Hopefully some things will stick. Nothing’s going to change in the short term. It might take two, three years before we even see the minimal benefits of some of these things. But I just like that we got something done in a bipartisan way. This is an issue facing everyone in the United States.The federal government did something, so I’m happy about it.

James:They’re trying to do some.

Dave:They’re trying to. Yeah. Yeah. And that’s true. That’s true. They’re trying to do something. Well, we’ll

James:See. I just want some grownups everywhere running our country across the board.

Dave:Yeah. Just instead of bickering, let’s just do something as a group. Well, keeping you up posted on if this thing passes, I think we’ve talked about the contents of the bill enough, but obviously if it passes, it’s something meaningful for the housing market, not expecting any short-term turnarounds from this, but maybe a step in the right direction to long-term supply development improvements that could help the market. That’s what we got today. James, Kathy, thanks for being here. This was fun.

Kathy:So fun. Thanks for having us.

Dave:Henry really missed out. What a

Kathy:Loser. I know. We miss him.

James:He’s doing cool things down in Texas though.

Kathy:Yeah, he is.

Dave:Well, thank you all so much for watching this episode of On The Market. I’m Dave Meyer. We’ll see you next time.