First Time Home Buying Secrets - Truth About Home Prices
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Transcript:
Kenn Renner:
Thanks Kenton. Alright, hopefully you’re feeling a little bit more comfortable about the whole thing. Let me show you a graph that really makes it clear. This graph, I’ve used it across the nation, and it really spells out the fact that there is no national market. The markets depend on where you’re at. Like Kenton said, there was a 4.44% appreciation, actually that was for 2008, that statistic. That was last year. Now, did you read anywhere about that? No, all you heard about was the national crisis. Values going down and people losing their homes. We went according to OFHEO.gov. That’s the federal government’s housing index website that they go to in order to make policy for Congress. So they’re not making this stuff up. It went up 4.44%, but all we hear about is the negative markets. You know why? Because guess where the media comes from? Where is the media stationed at, pretty much? On the coasts. New York, California, right? And so they’re thinking from inside their bubble window, and guess what sells better, good news or bad news? If it bleeds, it leads, right? I’ve stopped looking at the newspapers and now I’ve stopped looking at the headlines when I walk by to get my breakfast tacos in the morning. I’m just tired of looking at the negative thing. And my wife doesn’t listen to the news at all and guess what? She’s joyful, nothing affects her, everything is cool. You know, I told her about that plane crash in the Hudson River and the hero and all that and she said “what plane crash?” You know why? Cause it’s not that important. It’s really not. You know, when you really think about it, it’s more about dealing with your family and your home and raising up good kids and having a prosperous life. I mean today, Suzanne Jacobs from Gracy Title Company sent me an article in the Austin Business Journal saying that Austin was the #1 job growth area in the entire nation.
So then you look at this graph and it carries all the way out to the 1980s and a few years before and you can see that in California, well actually, take it to Texas. In the 1980s, Texas went through a boom. That was in the early 80s. In about 85, 86 when they changed the tax laws and the oil money started to dry up and all that, we went through a bust, which lasted til about 1990. And Alaska was on the same cycle, isn’t that interesting? Alaska was ranked above Texas on appreciation. It’s because they’re on the same counter-cycle. In California in the early to mid-80s, they were on a depreciating cycle. Then back about 85, 86, prices went through the roof, similar to what it did a couple of years ago. In 1990, 91, and 92, I was in the mortgage business in California and I saw the turn. You know why I saw the turn? It’s because there was only 12% affordability factor. That means only 12% of the people living in the county I was in could afford a medium priced home. I said “wow, that’s going to be problems if only 12% of my potential clientele can afford a home and there’s a lot of people out there like me trying to make a living, I better find a place where I can move to where I can make a good living.” So I started looking across the map and across the nation and Austin, Texas kept on coming up. There were a couple other places like Orlando Florida and some of these other places. So my father-in-law suggested that we fly out here to Austin, Texas and I never went back. I got here as quick as I could, I made plans, I got the family and now the whole entire family is out here and we’re prosperous. I was ranked #2 by the Austin Business Journal in 2005, #5 or 6 in 2006. It’s a pretty humbling honor that they gave me that. That was because I was able to work as a bigger fish in a smaller pond. But what happened was that from 1990 to 1997, California went through a bust and in 1997, the median price of a home in California was $197,000. Then what happened in Texas was Dell and all the dot coms in 2000 drove the prices all the way to their peak and then we leveled out for the last five years. We missed the boom that happened between 2000 and 2006. This went on for 2 years longer. Why? Because of the easy money. The mortgage market was so lax that you didn’t have to have a job, you could buy rental property, and there should have been a correction here in California, but there wasn’t. It went on for 2 more years, and now what do you see when you go into 2008 and 2009? That correction to where it should have been on its normal trajectory. And Texas has been chugging along on its course, it went up a little bit with its 4.5% appreciation factor. The bottom line is that if you bought a home five years ago for $150,000 in Texas and you take the 4.4% appreciation rate, that house is worth $190,000 to $195,000. That’s just using those average numbers. That means the house value went up 30 to 40 thousand dollars. Most of those people would have bought those homes for very little down with a huge gain in appreciation. This is leverage.