Existing home sales had a huge beat of estimates on Tuesday. This wasn’t shocking for people who follow how I track housing data. To understand why we had such a beat in sales, you only need to go back to Nov. 9, when mortgage rates started to fall from 7.37% to 5.99%.

During November, December and January, purchase application data trended positive, meaning we had many weeks of better-looking data. The weekly growth in purchase application data during those months stabilized housing sales to a historically low level.

For many years I have talked about how rare it is that existing home sales trend below 4 million. That is why the historic collapse in demand in 2022 was one for the record books. We understood why sales collapsed during COVID-19. However, that was primarily due to behavior changes, which meant sales were poised to return higher once behavior returned to normal.

In 2022, it was all about affordability as mortgage rates had a historical rise. Many people just didn’t want to sell their homes and move with a much higher total cost for housing, while first-time homebuyers had to deal with affordability issues.

Even though mortgage rates were falling in November and December, positive purchase application data takes 30-90 days to hit the sales data. So, as sales collapsed from 6.5 million to 4 million in the monthly sales data, it set a low bar for sales to grow. This is something I talked about yesterday on CNBC, to take this home sale in context to what happened before it. 

Because housing data and all economics are so violent lately, we created the weekly Housing Market Tracker, which is designed to look forward, not backward.

From NAR: Total existing-home sales – completed transactions that include single-family homes, townhomes, condominiums and co-ops – vaulted 14.5% from January to a seasonally adjusted annual rate of 4.58 million in February. Year-over-year, sales fell 22.6% (down from 5.92 million in February 2022).

As we can see in the chart above, the bounce is very noticeable, but this is different than the COVID-19 lows and massive rebound in sales. Mortgage rates spiked from 5.99% to 7.10% this year, and that produced one month of negative forward-looking purchase application data, which takes about 30-90 days to hit the sales data.

So this report is too old and slow, but if you follow the tracker, you’re not slow. This is the wild housing action I have talked about for some time and why the Housing Market Tracker becomes helpful in understanding this data.

The last two weeks have had positive purchase application data as mortgage rates fell from 7.10% down to 6.55%; tomorrow, we will see if we can make a third positive week. One thing to remember about purchase application data since Nov. 9, 2022 is that it’s had a lot more positive data than harmful data. 

However, the one-month decline in purchase application data did bring us back to levels last seen in 1995 recently. So, the bar is so low we can trip over.

One of the reasons I took off the savagely unhealthy housing market label was that the days on the market are now above 30 days. I am not endorsing, nor will I ever, a housing market that has days on the market at teenager levels. A teenager level means one of two bad things are happening:

1. We have a massive credit boom in housing which will blow up in time because demand is booming, similar to the run-up in the housing bubble years.

2. We simply don’t have enough products for homebuyers, creating forced bidding in a low-inventory environment. 

Guess which one we had post 2020? Look at the purchase application data above — we never had a credit boom. Look at the Inventory data below. Even with the collapse in home sales and the first real rebound, total active listings are still below 1 million.

From NAR: Total housing inventory registered at the end of February was 980,000 units, identical to January & up 15.3% from one year ago (850,000). Unsold inventory sits at a 2.6-month supply at the current sales pace, down 10.3% from January but up from 1.7 months in February ’22. #NAREHS

However, with that said, the one data line that I love, love, love, the days on the market, is over 30 days again, and no longer a teenager like last year, when the housing market was savagely unhealthy.

From NAR: First-time buyers were responsible for 27% of sales in January; Individual investors purchased 18% of homes; All-cash sales accounted for 28% of transactions; Distressed sales represented 2% of sales; Properties typically remained on the market for 34 days.

Today’s existing home sales report was good: we saw a bounce in sales, as to be expected, and the days on the market are still over 30 days. When the Federal Reserve talks about a housing reset, they’re saying they did not like the bidding wars they saw last year, so the fact that price growth looks nothing like it was a year ago is a good thing.

Also, the days on market are on a level they might feel more comfortable in. And, in this report, we saw no signs of forced selling. I’ve always believed we would never see the forced selling we saw from 2005-2008, which was the worst part of the housing bubble crash years. The Federal Reserve also believes this to be the case because of the better credit standards we have in place since 2010. 

Case in point, the MBA‘s recent forbearance data shows that instead of forbearance skyrocketing higher, it’s collapsed. Remember, if you see a forbearance crash bro, hug them, they need it.

Today’s existing home sales report is backward looking as purchase application data did take a hit this year when mortgage rates spiked up to 7.10%. We all can agree now that even with a massive collapse in sales, the inventory data didn’t explode higher like many have predicted for over a decade now.

I have stressed that to understand the housing market, you need to understand how credit channels work post-2010. The 2005 bankruptcy reform laws and 2010 QM laws changed the landscape for housing economics in a way that even today I don’t believe people understand.

However, the housing market took its biggest shot ever in terms of affordability in 2022 and so far in 2023, and the American homeowner didn’t panic once. Even though this data is old, it shows the solid footing homeowners in America have, and how badly wrong the extremely bearish people in this country were about the state of the financial condition of the American homeowner.

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Lender and appraisal management companies and other property data collection companies can now use Black Knight‘s Scout mobile property inspection as part of the value acceptance plus property data process.

With the cloud-based Scout app, users can easily collect detailed interior and exterior property data using a mobile device, Black Knight said Tuesday. 

“By using Scout, lenders experience significant efficiencies and cost savings as well as greater data transparency, minimize the potential for bias and realize faster origination turn times,” Ben Graboske, president, Black Knight data & analytics, said in a statement. 

The government-sponsored enterprise (GSE) approved six vendors following the roll-out of its new valuation initiative. The list includes some of the biggest names in the mortgage tech space —  Solidifi, Class Valuation, Clear Capital, Mueller Services, Inc., Accurate Group and Black Knight‘s Collateral Analytics LLC.

Through built-in rules, users can input specific home characteristics and take photos based on Fannie Mae‘s proprietary data requirements, the company noted. GPS tracking and other measures to validate the photos and data are collected at the borrower’s property. 

Fannie Mae‘s update of its Selling Guide, which occurred earlier this month and includes more options for property valuations, has stirred controversy. 

Key to the new options are Fannie Mae’s Property Data API, by which Fannie “has established a property data standard and API to collect data and images consistently,” the GSE said. According to Fannie, the process encourages the use of emerging technologies to capture property information, imagery and floor plans.

It’s a welcome move for mortgage tech firms in terms of modernization in the industry.

“This is a standardized data collection done at the property, which brings objective, transparent data into the whole process,” Kenon Chen, executive vice president of strategy and growth at Clear Capital, said. “I think that not only drives this program, but paves the way for a better appraisal process when an appraisal is needed.”

Appraisers, however, have voiced a desire to shift as much appraisal work away from Fannie Mae as possible.

“I encourage all appraisers to take a very serious examination of their current business model,” Washington-based appraiser Dave Towne wrote on AppraisersBlog.com. “If the Fannie Mae trend continues, you won’t have any of that business in the future anyway.”

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The housing market was crazy again last week. Mortgage rates fell as the banking crisis got worse and purchase application data grew for the second week in a row, but the big question is: Did we hit the seasonal bottom in housing inventory?

Here’s a quick rundown of the last week:

  • The 10-year yield had a roller-coaster week, and so did mortgage rates, but the 10-year yield held its critical line, and mortgage rates ended at 6.55%.
  • Weekly inventory increased by 1,734. New listing data collapsed, but we are putting an asterisk on that data line for this week.
  • Purchase application data rose 7% weekly, still down 38% year over year.

10-year yield and mortgage rates

A national banking crisis while the Federal Reserve raises rates and reduces its balance sheet sounds like a lousy cocktail for economics, but that is precisely what we are dealing with today. As I write this article, I see news that even Warren Buffet has been asked to chime in on how to deal with this crisis.

So, we can now add a new variable into the equation for 2023: What does a banking crisis mean for mortgage rates?

In my 2023 forecast, I said that if the economy stays firm, the 10-year yield range should be between 3.21% and 4.25%, equating to mortgage rates of 5.75% to 7.25%. If the economy gets weaker and we see a rise in jobless claims, the 10-year yield should go as low as 2.73%, translating to 5.25% mortgage rates. This assumes the spreads are wide as the mortgage-back securities market is still very stressed.

The economic data was OK last week. If we didn’t have the banking crisis, we would probably just focus on how firm the economic data was last week. GDP growth was estimated at 3.2%, jobless claims fell last week, housing starts beat estimates and purchase application data showed some growth. Retail sales were slightly below estimates, but we had positive revisions, and industrial production was unchanged.

Last week’s 10-year yield took us to the critical line in the sand.

Last week the  two-year yield collapsed from a 5% level to under 4%. This bond market is screaming at the Fed to cut rates. However, many Wall Street firms were betting on higher rates and got burned by the banking crisis. So, the market is wild and the Fed might not care what short-term rates are doing now. 

Mortgage rates fell and ended the week at 6.55%, however, we see a lot of stress in the financial markets. Many people wondered why mortgage rates weren’t lower on Friday; the answer is that the banking crisis has stressed the mortgage-backed securities market more than when bond yields fell to these levels last time.

So this is going to be an epic week because we have incorporated a new variable into 2023 that wasn’t in the equation at the start of the year and the Fed meets on Tuesday and Wednesday.

I want to see how the 10-year yield acts this week. Can we get follow-through bond buying, which would take a direct shot at the low-level range of 3.21%? That would be a big deal to me because it’s happening with the labor market still doing OK.

We don’t know what news can happen at any second to change the landscape of the economic discussion until the financial markets calm down.

With the potential of news getting worse in the short term, we need to be mindful that we can see some crazy market pricing in mortgage rates and moves in the 10-year yield. So, every day counts now during a banking crisis, as the world markets are trying to restore some order.

Weekly housing inventory

Looking at the Altos Research data from last week, the big question is whether we are finally starting to see the seasonal increase in spring inventory. On this front we have some good news and some bad news.

First, we saw a slightly increased number of active listings, which made me jump for joy! Last March is when we saw the seasonal bottom before inventory took off, so I am hoping we get the same growth in the data this week, making it back-to-back years that we bottomed out in March. Although that’s not normal, it’s better than what we saw in 2021 when we didn’t get hit bottom until April.

  • Weekly inventory change (March 10-March 17): Rose from 412,535 to 414,278
  • Same week last year (March 11-18th): Fell from 247,320 to 245,776
  • The bottom for 2022 was 240,194

The seasonal increase in inventory means more sellers can also be buyers of homes and fewer bidding wars in certain parts of the country.

Now the bad new: new listing data fell so much this week that I am putting an asterisk on this week’s data until we see if this is a trend or just a one-off in the weekly data that can occur from time to time.

Also, we are creating a bigger gap in the year-over-year data. Earlier in the year, we were on par or even slightly higher some weeks than the previous two years. Now we are creating a bigger gap, as you can see below:

  • 2021 60,904
  • 2022 55,348
  • 2023 42,407

For some historical reference, these were the weekly inventory data in previous years:

  • 2015   80,909
  • 2016   84,647
  • 2017   78,237

Now, this new listing number can be one week of data that just reverts to the trend, which would be higher than this level. Or, like last year at the end of June, when rates spiked higher, we saw a noticeable decline in new listings, since households didn’t want to list their homes with rates rising.

This is something that I have talked about before — some homeowners just don’t want to buy homes with mortgage rates of 7% plus and decide to call it to quits. This is a problem when mortgage rates move higher too quickly, and it gets harder to make that big life-long decision when the cost of housing matters.

Let’s wait two more weeks and see if this new listing trend continues or just reverts higher. I am hoping it’s just a one-week event.

Purchase application data

Last week we got better news with another 7% week-to-week gain on purchase apps, and the year-over-year decline also fell. However, as I always stress, the bar is low here, so it doesn’t take much to move the needle on application data when mortgage rates move lower.

When rates spiked from 5.99% to 7.10%, that gave us one month’s negative data week to week, but the last two weeks have been positive. We have had more positive purchase application data than negative since Nov. 9. Since this data looks out 30-90 days, this week’s existing home sales report should see a bounce.

We need to be mindful of the data coming out later in the year with the one-month decline in this index. However, you don’t need to be a rocket scientist or have a Ph.D. in economics here to realize the housing market is moving with where the 10-year yield is going, even with mortgage spreads wide. So with all the drama we have today, let’s see if mortgage rates fall further this week or whether the line in the sand holds.

The week ahead

This week we have existing home sales and new home sales reports coming out, but to be dead honest, economic data doesn’t matter until we get control of this banking crisis situation. While writing this article, news broke that UBS is buying Credit Suisse with government support and Flagstar will buy Signature Bank assets. In addition, the Fed announced a
coordinated central bank action to enhance the provision of U.S. dollar liquidity.

In times like this, market drama needs to calm down first before we can focus on the economic data. The Federal Reserve will meet this week on Tuesday and Wednesday, and the Q&A portion of this meeting will be epic.

Remember that back in November Fed Chair Powell said, “I don’t have any sense we have overtightened or moved too fast.” Now, after all the emergency banking lending programs and global coordination to keep the banking system working, does he still believe this statement? I am hoping someone asks him this direct question. 

Listening to what the Fed says this week is critical. We can focus directly on the housing data, but the noise this week will determine whether the market believes this banking crisis is under control or it’s burning out of control, forcing the Fed and the government here and around the world to do more to calm the markets down.

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The golden age of cash flow real estate investing could be over as we know it. For the past decade and a half, landlords got used to buying standard homes that made a killing in cash flow. Combine that with exponentially appreciating home prices, and anyone who purchased a property in the past ten years looks like an investing oracle. But now, the tide is starting to turn, and rookie real estate investors are struggling to find any house in almost any market that can cash flow. So what happened, and why has the nation’s cash-flowing real estate suddenly disappeared?

Welcome back to another Seeing Greene, where your “don’t just go for cash flow” host, David Greene, is back to drop some real estate knowledge for ANY level of investor. In this episode, we get into why it’s so challenging to find real estate deals that cash flow in 2023, when to invest in an appreciation vs. cash flow market, and whether or not to sell a property that isn’t profitable. Then, we switch gears and touch on how to vet a private lender you met online and whether or not an out-of-state rental rehab project is too risky for a brand-new real estate investor.

Want to ask David a question? If so, submit your question here so David can answer it on the next episode of Seeing Greene. Hop on the BiggerPockets forums and ask other investors their take, or follow David on Instagram to see when he’s going live so you can hop on a live Q&A and get your question answered on the spot!

This is the BiggerPockets Podcast show 741.
The reason you’re feeling bad is might be ego. You’re looking at other investors that are making money. You’re looking at your balance sheet every month and you’re saying, “Well, I’m losing money. I’m doing it wrong.” Maybe not. Maybe this is how real estate has always worked over time. It was the people willing to lose the short term to make money in the long term that worked. Now, I hope it doesn’t stay that way, but I am preparing for a reality where the golden age where you’re just bobbing for apples, you just put your mouth in there and you came out and you hope your apple’s bigger than the other apples, but you always got an apple, that could be over.
What’s going on everyone? This is David Greene here today with a Seeing Greene episode if you didn’t notice it in the title. If you haven’t heard one of these before, you’re in for a treat. On these shows, we take questions directly from our audience base. That’s right, you. I deal with the struggles you got going on, questions you have about real estate, clarity that you might need. Or when you have several options, which one would be the best? I love doing these shows and I love you guys even more for making it possible because you ask great questions, which lead to great shows.
Today’s show is fantastic. We get into what the person might be doing wrong if their property is not cash flowing right now. This is a great topic that we get into about ways that you can approach real estate investing as well as a small tweak that would make that property cash flow and how they can execute it. Should I take on an out-of-state rehab on my first deal? Things to be aware of if you’re going to invest out of state. I do a lot of that myself as well as renovation stuff, which I also do a lot of. And what you do when you can’t find cash flow in your market. Is it too late to invest in real estate? Should we stop listening to BiggerPockets and instead start buying NFTs again, cryptos, investing in tulips, buying Beanie Babies, maybe Pogs, if you guys remember that. Is that the future? Should we buy a bunch of that and wait to see if it comes back or is real estate still a good option? All that and more in today’s Seeing Greene.
Also, I just want to remind you guys, I forgot to turn the light on again. I’m really good at doing that, so as soon as this little segment ends, you’re going to see the light turn blue. Don’t get confused. It’s still Seeing Greene. It’s just going to be greenish blue. What are the colors when you mix green and blue? Is that like turquoise maybe? Seeing turquoise for the first 15 minutes and then it goes back to being green. This is just me being forgetful, guys. It ain’t easy being Greene.
All right, today’s Quick Dip brought to you by Batman is, we have a new show coming on the BiggerPockets YouTube channel where I’m going to be a frequent contributor. I’m going to be showing people how to make more money in their current job. This is something that I’m passionate about, I’m very, very into. Don’t quit something that you’re not good at and just try to find a new thing that you think you’re going to be better at without putting effort into the first thing. You got to pursue excellence in whatever you do. So if you want to be featured on that show or this one, go to biggerpockets.com/david. Write out your question and check the jobs box if you’d like to be on the YouTube channel. All right guys, that’s enough of me. Let’s get into our first question.

Hey, David. My name is Nick Gutzman. I’m 19 years old and a sophomore at Colorado Mesa University in Grand Junction. I’m looking to purchase a single family property near my school to ideally lease the students. I’ve been consistent using Zillow and BP’s tools, but I can’t seem to find a deal with what current rates as well as supplies in my town. I’m struggling to take the next actionable step. My primary question is what are some tools or strategies you could recommend for finding a deal and what are some creative ways I could finance a deal? The lender I would likely go through told me I could expect a 7.5% rate from him. With that number, I’m struggling to find anything that pencils out and works for my situation. Thank you so much for all you and BP does. Have a great day.

All right, Nick, thank you very much for the video. This is a common problem a lot of people are having, so don’t be discouraged. This is just the state of the market that we’re in right now.
Now the good news is the reason it’s so hard to find deals is because real estate is still competitive and valuable and people want to own these assets. Couple things that we can get into, 7.5% is probably a… That’s a standard rate, it’s where most people are. If you’re working with the lender and that’s what he’s telling, it’s probably what you’re going to get. If you’re trying to find a creative way to finance your deal, that just means you have to find the money from somewhere else.
There’s not a lot of people that have hundreds of thousands of dollars laying around that are going to be comfortable lending it to you for less than 7.5%, which means you’re probably only going to get that from the owner, which means you probably need some kind of owner financing, which means you’re either going to have to overpay for the property to make it worth it for them to give you the better rate you want, or you’re going to have to find a distressed motivated seller, which is going to be a lot of work, and frankly, going to be very difficult for you to do while you’re going to school. None of those sound super appealing for the situation that you’re in.
The advice I’m going to give you is that instead of looking to find a deal, I want you to look to make a deal. If you’re having a hard time getting the numbers to work on a property that you’re going to rent the rooms out to other students, you might be analyzing the wrong deal. So here’s what I’d like you to do. We’re going to work backwards from this. Let’s say that at the interest rate you’re being given at the price range you’re looking at, let’s say that you’re coming up with a $4,000 a month mortgage, which means you need to make more than $4,000 a month from the rentals. If you can get say $800 a room and you can get a five bedroom house, that now becomes $4,500. That could be enough to be more than the $4,000 mortgage. We’re assuming taxes and insurance are included in that $4,000 number. Which means your goal is to find a property that has five or more rooms.
Can you find a property that has five bedrooms but has a living room and a family room and you can convert the living room into two more rooms? Can you find a property that has four bathrooms and that has enough square footage that you can add stuff to? I’d set my search parameters to only show me stuff that has high square footage. In addition to that, I’d be looking at properties that have more square footage than is being advertised. So one of the things I do when I’m looking at houses is instead of clicking on the arrow to the right and looking at all the pictures that the agent has uploaded, I go backwards. I click the arrow to the left and I look at the back of the house first.
Now, the reason I do that is if there’s unpermitted square footage that’s ugly that the realtor doesn’t want to show in pictures, I want to see that. I want to see framing in the basement. I want to see the partially finished ADU. I want to see the extra garage on the property that has electrical and plumbing in it. A lot of people put bathrooms into their garages because when they’re out there working on their car, working on their projects, they want to be able to stop and go to the bathroom without walking in the main house. Well, once it has plumbing like that, you can finish out that bathroom and make it nicer and add a kitchenette into those properties for much less money than when you have to run plumbing and drainage all the way into that asset. So you need to look for properties like this that other people are missing.
Now, all of that being said, that might not still be enough because it looks like you’re looking in a town that doesn’t have a lot of inventory. That’s a problem. If you’re in a college town and there isn’t a lot of listings that are hitting the market right now, this is going to be tough. Part of that is because sellers are not putting their homes on the market because they’re waiting for prices to come back up. Sellers have seen, “Well, prices are down, people were selling for more before. I don’t want to sell my house for less money.” It takes a long time before they get to the point where they just willingly accept this is what a property is worth, and that frustrates buyers. So you could look in a different town and look to accomplish the same thing. Different college town that has more inventory, that’s one method you could take. Or you could use some of the creative methods like driving for dollars, skip tracing. You could look at neighborhoods and find the properties that are listed as more square footage. A lot of that’s public data.
So if you could figure out a system of finding the houses that are at least 3,000 square feet, you know they’re likely to have more bedrooms and bathrooms, you could go knock on their doors, you could call those people, you could send them letters. You could try to find an owner that is willing to sell, but again, this is not a great return on your time. The odds of finding the house that you want and then they also have a seller that’s willing to sell and they’re also going to do it at the price you want is very difficult. I know a lot of people pay money to take those courses, and this is very popular right now because deals are hard to find, so we’re out there trying to use creative methods.
What no one tells you is it’s basically like working a full-time job. Oftentimes after all the time you got to put in to make this happen, you’d have made more money if you’d just got a job and worked. So it’s not always the best method. What I do want to say is don’t be discouraged. You’re trying to do this at a very difficult time in the market. We are in a stalemate. Sellers don’t want to drop their prices because they’re not desperate yet. Buyers don’t want to or cannot pay the higher prices that sellers want, and there is not enough inventory to balance this out, so just stay in the fight. You never know when the next listing’s going to pop up.
What you want to make sure is that you see it first. So set your filter to show you only houses with at least 2,500, ideally 3,000 square feet, have more bathrooms, and then look at all the houses that come out and see if there’s more square footage in that house than what the listing actually says or that can be converted so that you can make maybe a five bedroom house into six bedrooms, plus it has a garage that can be converted into two to three bedrooms with a kitchenette and a bathroom. If you could do something like that, you can find a way to make the property work for what you’re looking to do.
All right. Our next question comes from Josh Lewis in San Diego. Josh says, “I love all your contributions to bp. You are a solid stalwart for the mission.” Well, thank you for that, Josh. “Some context, I own a property in San Diego. I have access to a large chunk of equity, approximately 350,000 to 450,000 depending on the appraisal, and I want to utilize a HELOC in conjunction with the BRRRR method to acquire my first rental property and kickstart my journey. Question, looking back on your career, if you were given the same circumstance, would you find it more advantageous to go after one larger expensive property like a $300,000 fixer upper to BRRRR in the lucrative California market? Or would you go after multiple properties, say, in the SEC football market, like $250,000 properties? For my circumstance, I’m giving more value to cash flow, but I do understand there are more factors at play here with potential long distance management, which I’ve already purchased both your BRRRR book and your Long-Distance Real Estate Investing. Thank you for your time and your propensity to educate.”
Well, Josh, thank you for your mastery of the English language. You said both propensity and stalwart as well as circumstance all in your questions here. Very impressive, my friend. All right, let’s get back to the first thing you said. Looking back in your career, “If you were given the same circumstance, would you find it more advantageous,” another big word, “to go after one larger expensive property or several smaller properties?” I don’t look at the number of properties as the way to approach this question. Now, I will say in general, less is better, because the more properties you have, the harder it’s to manage them. The more expensive they become and the more things you miss.
So I am in general inclined to buy a million dollar property over two $500,000 properties, but it’s not always that simple. I would more look at the total amount of capital that I’ve deployed, okay? So if I’m going to buy a million dollars worth of real estate, whether it’s over two $500,000 houses or $1 million house or three $300,000 houses, the number of houses isn’t where I start. What I would look at is the value of the properties I’m buying. What is the game plan here? What’s the play? I think people do better over the long term, investing in areas that both appreciate in price and cash flow, okay? It’s often framed like cash flow or appreciation, and it is isn’t true. When you’ve done this for as long as I have, you start to recognize patterns. And what you see is the areas that appreciate and value also appreciate in rents. The two almost always go hand in hand. And so cash flow grows over time just like the value of the asset grows over time.
When you buy in these cheaper markets, the $150,000 houses, it’s not that they don’t appreciate, it’s that the rent also doesn’t go up. And everybody here who bought into turnkey properties owns in the Midwest, I’m getting a hallelujah amen out of them, and they’re all saying now, “Wish somebody would’ve told me this,” because the assumption with real estate is that rents are going to go up every year, but your mortgage is going to stay the same. That’s what makes buy and hold so powerful.
But that doesn’t happen in every market. Some of the areas like Detroit, Indiana, the Midwest in general, the rents may go up, but it’s very small. It could be like 10, 15, 20 bucks a year sometimes. This is the issue that I have with my cheaper properties. Versus the stuff I bought in higher growing areas that was more expensive, you get big rent jumps sometimes. My California properties were jumping $200, $300 a year in rent. So it could go from 1,500 to 1,800 to 2,100 to 2,500 over a four-year period. And when you bought it and it made sense when you first got it at 1,500, it’s really nice at 2,500. That’s the strategy that I want to take.
Now, this doesn’t work if you have to go into it and you need the cash flow right away, which is why I tell people all the time, real estate is a bad thing to invest in if you need money now. This is a thing where you’re constantly delaying gratification. This is putting 20 bucks in the pocket of your coat and then finding it later like, “Oh, cool, I forgot that I put this in here.” It’s like a supercharged saving account that’s going to grow over time. Real estate works much better when you give it a longer timeline to grow, like planting a tree. You can’t expect fruit the first year you planted the tree. If that’s the situation that you’re in, you need to do something else. You need to plant a bush or you need to grow a garden of flowers that can be harvested and sold and it’s going to be more work. It’s not like planting a tree that just puts off passive income all the time. Passive income takes time to develop.
So the first thing I would tell you when you’re looking at what you should do here is invest in an area that is likely to grow, okay? When I talk about ways to make money in real estate, there’s basically 10 ways to make money in real estate that I’ve concluded and five of them have to do with equity, okay? The first one that I just described is what I call market appreciation equity. This is choosing a market that is more likely to appreciate than other markets. It is not speculation, it is not guessing. It’s using education and facts to make an educated decision.
The next is what I call natural equity. This is just inflation combined with paying down your loan. That’s going to happen no matter what it is you buy, but timing the market can help. When you buy into markets where you’re more likely to see inflationary pressures, you’re more likely to make money in real estate. So when I see inflation ramping up, I put more time and more money into real estate versus my businesses. If I see inflation slowing down, I’d be less inclined to go crazy buying real estate and I’d be more inclined to put money into businesses or other endeavors. When I say put money, I mean put time and energy into them.
Another way that you can build equity in real estate is buy what I call buying equity, and this is just getting a good deal. This is buying less than market value. So if you’re going after a million dollar asset and you can get it for $825,000, you just bought $175,000 worth of equity. So the actual deal itself plays a role in this. And then the fourth way that I talk about creating equity is forcing equity. This would be something like a value add. You’re going in there and you’re going to cosmetically improve it or you’re going to add square footage to it. You’re going to do something to make the property worth more.
Now, I don’t look for deals that have one of these elements, although I may buy a deal that has one of these elements if it’s got a lot of it, if I can add a ton of value, if it’s a super hot market. Maybe I buy into a really hot market, I buy a turnkey property because I believe that the market appreciation equity is going to make up for the lack of value add because there’s nothing to add, right? Or maybe opposite. I’ll go into a market that I don’t think is going to grow very much and I don’t even get a great deal on it, but I see there’s so much value I can add to the property that makes worth it. But in general, I look for a little bit of all four. I can’t remember what the fifth one is off the top of my head. I might have to think about that.
But that’s how I want you to be thinking. “How can I add value to these properties that’s going to build me equity if I don’t need the cash flow right away?” Now, this is not saying cash flow doesn’t matter. What this is saying is focus on your equity and then convert that into cash flow. Much easier to build half a million dollars of equity and then go invest that for cash flow than it is to try to save $500,000 and invest that for cash flow. That might take you 40 years to save $500,000. That’s a lot of money. You can build that over three to five years if you’re using the methods that I just described when it comes to creating equity and then improving that equity yourself. So the first thing I would do is I would’ve gone into the markets like California. And I bought it at a great time. That was just dumb luck. I got a lot of natural equity because I started buying in 2009 through 2013, and then we made quantitative easing, and boom, the market shot off.
And then I bought it in a great market. California went up more than other markets. I also bought well. I bought them under market value, and so I came in with some equity. What I didn’t do in California was I didn’t force equity. I didn’t buy properties and then fix them up because I didn’t understand real estate that well. I didn’t understand construction, I didn’t know how to look at a property and see a vision for it like what I can do right now. So that’s one thing I would change, is if I was going into it where you are with my eyes now, I’d be looking at those four things and seeing how do each four of these apply. This is what we call the Greene goggles. When you’re looking at real estate from my eyes, you’re looking for those four things.
I don’t like the multiple houses in one market because it gives an illusion of safety, like, “Well, I’ve spread it out over three houses.” It’s just oftentimes you’re buying three problems instead of one good deal, right? You don’t hear about any investors, at least in my whole career, that made a lot of money buying cheap real estate and getting a lot of it. It doesn’t work. It’s like going to the flea market, yeah, you can buy a lot of the, not Nike, but Bike. You can buy a lot of Bikey shoes because they’re cheap, but they fall apart really quick and they give you blisters and you wish you never bought them and then you never want to wear them and then you’re trying to get rid of them as soon as you can and the next sucker comes in and they buy these.
What you hear about when it comes to buying real estate are the three rules, is location, location, location. There’s a reason that all the salty whiteheads are all saying the same thing. They bought the right location. You see Warren Buffet give the same advice when it comes to stocks. He’s not looking to get the deal of the century. He’s looking to buy the best companies, which would be the equivalent of location in real estate, and he’s looking to buy more when the market is down, which would be the equivalent of natural appreciation or inflation and loan pay down in our world. He’s using the same principles I’m talking about now, but he’s applying it in the stock market.
Well, in the real estate market, this is how that works. You’re talking about cash flow, of course you want it, of course you should want it. We all should want that. What I want to advise you is that you don’t need it until retirement. You don’t need cash flow until you just cannot work anymore or you don’t want to work anymore. So if you can delay that, if you can let the property build equity for you, and let’s say you buy a million dollar property for 825,000, it goes up to 1.2 or maybe two properties that’s worth a million that you pay a total of 825,000 and they go up to 1.2 and then the market kind of stalls and you sell those in 1031 into a new fixer upper project, you go by $2 million worth of property and get them both for 1.67 and then they go up to 2.4, you’re actually creating equity at every single rotation of this snowball that’s going down a hill.
And then when you’ve got that equity, then go invest it into the cash flow and then reive your scenario and decide, “Do I want to keep investing? Do I want to chill? Do I want to quit my job? What’s my next step?” We got a lot more options if you take the road that I’m giving you now, which most people don’t see. I look at it a little bit differently, which is why you guys are here for Seeing Greene episode.
And I just reminded myself that I’m doing a Seeing Greene episode, so now the light is green behind me. I swear people like me do the dumbest things over the dumbest things, like I can give a brilliant response to some question and people are like, “Mind blown,” but I can’t remember to turn my light green before I record. This is very common for me. I have to put my keys and my wallet in my phone in the same place because if I don’t, I’ll leave the house without one of them. I’m terrible for that. So if you ever make mistakes, if you ever do absent-minded things, if you ever beat yourself up for doing something that you think you shouldn’t, leave me a comment. Tell me what are the things that you do that no one knows or make you feel so dumb that you can share with the rest of us? And let’s see if other people make the same mistakes.
I know that I will get a comment from someone that says, “How am I supposed to know this is a Seeing Greene episode if the light is blue behind David’s head?” We get those every so often when I forget to do this, even though the title will say Seeing Greene, and I’ll start the show-off by saying it Seeing Greene. There’s always someone who’s like, “I’m confused. Is it Seeing Greene or Seeing Blue?” What I do about this light?
All right, our next question is a video from Justin Pack in New York.

Hey David, thanks so much for making this podcast. Really enjoy the fact that you all take the time out to answer our questions and help out us newbies. So you all always talk about how house hacking is a great strategy to get started. Well, I’ve achieved step one and got a house hack. I was able to live very cheaply, renting my house out by the rooms. It’s a single family in Dallas that I bought in 2019. I’ve now rented out all the rooms and moved out of the house. The problem is the property’s not profitable, losing just over $200 a month in expenses after everything’s accounted for, but I have still haven’t transitioned into not paying for utilities, internet and those other things there. So I now have almost $100,000 in equity in the property after the pandemic popped, and I’m looking to figure out ways to either make the property more profitable or figure out if I should sell it. Let me know your thoughts. Thank you.

Justin. Good stuff, man. This is a great question and you’re giving me a platform to just rant about real estate in a way that I rarely get to. So I appreciate you thanking me for making the show, but I want to thank you and every other listener we have for asking great questions because we wouldn’t have this show without it. And trust me, lots of people are in your same position and are struggling with your same situation, so they’re going to love hearing this.
All right, let’s break this down a little bit. When I first started investing, I had this thought. It was like 2007 and I was trying to figure out what could I buy, and I was talking to agents and I was like, “Yeah, I want a property that’s going to make more money than it cost to own it.” And they were laughing at me like, “Real estate doesn’t work that way. You don’t buy a property that makes more money every month than what it costs, at least not when you first buy it.” This was in the height of the market exploding, and so of course nothing was going to cash flow at that time. And I didn’t pull the trigger. I’m glad, because waiting, I got a better opportunity.
But I did realize something in that moment. In a sense, they were right. Real estate only cash flows if you get an incredible deal or you buy in at an incredible time or there’s not enough competition for the assets that you have an incredible opportunity, or you wait. Okay? Now I know this is going to sound like blaspheming real estate for the cash flow investors out there, so just hear me out. When you look at other countries, Australia, Europe, South America, their real estate does not cash flow when you buy it.
This is crazy. This is kind of an American phenomena. Nobody buying in Toronto is getting cash flow. Very few people that are investing in most Canadian areas are getting cash flow. In fact, the only areas that typically do cash flow historically at all times are the areas where management is a burden. You actually have to make it like a job to manage the property and manage the tenants. It is not passive income. We’ve become accustomed to this because we came out of such a huge crash in our economy and real estate that no one wanted to own these assets and no one wanted to buy. So we ended up with way more tenants. And then we also paired that with an economic boom after the crash where everyone is making more money, wages were going up. The value of these assets was going up. Inflation ran rampant. We had this perfect mix of you could buy real estate at incredibly low prices and then the economy soared after that. You got the best of both worlds. The result was cashflow became the norm.
And so as investors, we would just peruse through Zillow looking at every house and saying, “What has the best cash flow?” And it was awesome. I jumped in with both feet, right? I was working a hundred hours a week as a cop, saving as much money as I could because I felt like Super Mario when he touches the flower and he’s invincible and everything that I touched dies, that’s what I was doing. I’m like, “Dude, I’m going at a dead sprint and I’m buying as much of this real estate as I can.” Rates were low, property values were low, everything cash flowed. I could buy in the best markets and I could cash flow, and I was getting appreciation. I was like, “Everything was great,” and it all came to a screeching halt once we started to raise rates, and now we’re all frustrated. “I can’t make it cash flow. I’m doing something wrong. I’m messing up. I’m bad at this. Maybe I should go do something else.” No, this is actually normal.
Nothing in Australia’s going to cash flow. Nothing in Canada’s going to cash flow. Nothing in Europe cash flows. In fact, if you go to other parts of the world, you don’t get FHA loans. You don’t put 3.5% down on an asset. In fact, nobody gives loans for 30 years at a fixed rate of 3% or 4%. No one gives loans at a 30-year fixed rate anywhere. You wouldn’t do that. You wouldn’t lend your own money for 4% for 30 years fixed. That only happens because our government sponsors these loans. We’ve got a whole system created to keep interest rates low, and I won’t go into that right now, but this is why I started The One Brokerage is because I was fascinated with how lending worked, and I wanted to learn more about it and be able to help people buy real estate from lenders that they could trust. But I realized, “Oh my God, this is crazy.”
If you go to Egypt, they’re going to ask you to put 50% down and there’s going to be a balloon payment in two to three years, okay? It’s almost like a construction loan. A lot of people in other countries are paying cash for their houses, which is why houses are passed down from generation to generation. You can’t buy it. Okay? So it’s a little bit of a background in how hard real estate investing is in other places.
Here’s what I learned in 2007. Even if I paid ridiculously high prices for that real estate and I lost money every month, when you look at rent going up over time, your mortgage staying the same over time, the principle being paid down on the debt over time, I put it into a graph basically and I saw there was a break even point at about seven years in where I would lose money every year and at seven years years in I would start to make money. And then I said, “Okay, well, how much money will I have lost over seven years? And now that I’m making money, how long will I have to wait before I get paid back for the money I lost?” And at about nine years, I noticed like, “Okay, I’ve now broken even from cash flow.” This is before you get the loan paid down. This is before you get any kind of appreciation. This is just purely from rents going up.
And I realized, “Well, if I’m going to own this asset for 30 years, 40 years, 50 years, and I just got to wait nine years before I break even, that’s not the end of the world, especially if the tenant’s paying the mortgage off for me. So when I looked at it at a 30-year perspective and I ran the numbers, I saw, “There’s nothing that comes even close to this. I just got to be able to make it nine years of losing money, and then I’m golden.” Now, please stop screaming. Don’t yell at your phone. Don’t yell at your computer. I know what you’re thinking, like, “Don’t ever do that.” I’m not telling you guys to go do it. I’m saying it makes sense to do that if you take a long-term approach. When we take a short-term approach, when we say, “I want to quit my job right now, I need to find a duplex so that I can do it. I need money right now. I want to buy a Tesla right now. I need immediate gratification,” real estate becomes very frustrating.
I don’t have hardly any deals that made me a ton of money right out the gate, but I have zero deals that don’t make me money after I’ve owned them for a while. And I learned that delayed gratification is really the secret to wealth building as well as real estate investing. The deals that I bought, I have one in the top of my head right now, okay? It’s this 8,000 square foot cabin that I bought in the Smokey Mountains. It was owned by an executive at either Coca-Cola or Pepsi, I get them mixed up, but he was responsible for developing the extra value meal at fast food restaurants. So he got them to sell more sodas because a soda came with every single meal when they did the extra value meals.
He built this amazingly huge awesome place, okay? I bought it and it is making me money. It’s doing well because it can sleep like 30 to 40 people. It’s very unique. I tend to buy real estate that doesn’t just fall into a cookie cutter pattern, and this is why. But when you look at how much I can charge per night on that property, some of my other cabins maybe go for 200, $300 a night. That’s like the cheap stuff, okay? So if I get a 10% increase on that in a year, which would be really good, I go up 20 to 30 bucks a night. But on these expensive places that maybe I can charge 1,500 a night, a 10% increase is $150 a night.
Now multiply $20 a night times however many, 200 days in a year, or 150 times 200 days in a year, and the next year I’m getting a 10% increase hypothetically on the 1,500, that now became at 150 to that, so I’m getting a 10% increase on the 1,650. Okay, now my rents are going up $165 a night. It exponentially starts to increase because I bought more expensive real estate in markets that didn’t immediately take… It didn’t make me a ton of cash flow right off the bat, but it will grow to make much more cash flow.
This principle is what I wanted to highlight. Now, I want to bring this back to your specific scenario, my man. You are losing money right now, but you’ve gained a hundred thousand dollars of equity so you haven’t lost money, okay? You got to go through a lot of months of losing $200 a month before you actually break even at the $100,000 of equity that you have. So the question isn’t, “Do I need to sell this thing immediately and not lose the 200 a month?” unless your finances are in a position that you can’t take that blow. If you live paycheck to paycheck, $200 a month is devastating.
If you can’t find a one day of overtime or a side job… I mean, I know waiters that make 200 bucks a night work in a shift at a restaurant, okay? And if you said to me, “David, you got to work once a week.” No, once a month at a restaurant in order to not lose money on this real estate deal. You’re going to lose 200 bucks a month on the deal, but you’re going to make 200 bucks a month at the restaurant. Would you be willing to work once a month for the next 30 years to have a property completely paid off and appreciated? In fact, it wouldn’t even have to be for 30 years because at some point the rents are going to catch up. That is a no-brainer yes, do that. Okay?
The reason you’re feeling bad is might be ego. You’re looking at other investors that are making money. You’re looking at your balance sheet every month and you’re saying, “Well, I’m losing money. I’m doing it wrong.” Maybe not. Maybe this is how real estate has always worked over time. It was the people willing to lose in the short term to make money in the long term that worked.
Now, I hope it doesn’t stay that way, but I am preparing for a reality where the golden age where you’re just bobbing for apples, you just put your mouth in there and you came out and you hope your apple’s bigger than the other apples, but you always got an apple, that could be over. I don’t know. I don’t know, but I know that we kept interest rates really low for a really long time. And if you wanted a house at all, you had to overpay. You couldn’t get inspections. You got in a bidding war, you were very uncomfortable, you didn’t know what you were going to end up with, and it was risky. And I know that wasn’t healthy either even if you got cashflow right off the bat.
Now that we’re letting interest rates come up to kind of more traditionally normal levels, we’re all freaking out saying, “This isn’t how real estate works.” It might be that we have to accept that this is the new normal. And location, location, location is becoming important. Why? Because that’s where the rents go up. When you buy in the best location or you buy the best property, the rents go up everywhere and you get out of that hole faster. You get out of the hole of losing money faster.
Now, I’m not telling anyone here, go buy properties that lose money, okay? If you could avoid it, avoid it. I am saying, Justin, that you might not be in the worst situation ever. It might be your ego or you’re comparing yourself to other people’s deals that’s making you feel bad about this. Okay? This is Dallas, Texas. This is one of the hottest markets in the country. If I had to pick a market to put my money in over the next 15, 20 years, Dallas, Texas would be in my top three. That is a awesome market. You are going to continue to crush it in both rent growth and equity growth buying in Dallas. That’s a great place to park your money. It’s going to grow faster than if you found a place that cash flowed positively 200 bucks, but just was stagnant from that point forward. I don’t think this is a bad investment.
Now, it is a three bed, three and a half bath, okay? What if you just had a five bed, three and a half bath? Could you sell this property, move that money to another property in Dallas, Texas that was five bedrooms? That might solve your cash flow problem right away and you’re going to get more appreciation, okay? You did everything right. You just bought a house a little bit too small. If you just had two more bedrooms, maybe even one more bedroom, you wouldn’t have the negative cash flow. So this is an easy problem for you to solve. Sell it, move your equity into another deal that has more bedrooms. Boom, your cash flow positive. Keep it in that market for the long term, right? You want to plant a tree in Dallas, just uproot it, plant another tree also in Dallas.
But even if you can’t, for some reason if you don’t, it doesn’t mean you made a bad deal. You’re going to make a lot of money on this deal. Drop the expectation that real estate is supposed to be the magic pill that solves all of your problems in day one. You’re doing great, man. And you learned a lot from the deal, okay? You should be doubling down on real estate investing. You’re the person that should be investing more, buying more properties, doing better on everyone. Just make the small adjustment. When you’re running by the room, you need more rooms. It’s that simple, right? If you’re to sell cars, sell more expensive cars.
Sometimes there’s a tiny little thing that we can tweak that makes a huge difference in the returns that we get. For you, the minute that I see you bought a three bedroom, three and a half bathroom, I just think I wish the David Greene team had represented him because we wouldn’t have let you buy a three bedroom house. We would’ve looked for a five bedroom house that also had the ability to frame another bedroom out of a den and make it six bedrooms, and then you’d be making a bunch of money.
But I will tell you, the cashflow on this property will pale in comparison to the money that you make paying off your loan and letting the value increase over time. Thank you very much for your question. This was really, really good. Hang in there Dallas. Rents are going to continue going up while the rest of the countries don’t keep pace because that’s a great place to invest where a lot of people are moving to. Send me another question if you want to get deeper into what you could do to sell that property, what you need to talk to the agent about, where you should list it and where you could put the money into a new property.
All right, everybody, thank you for submitting these questions. I love it. In fact, I’ve talked a lot longer than I normally do on some of these because I’m so fired up about these questions. And I know so many of you love real estate just like I do, and you’re freaking frustrated. It’s very hard to find a place to put your money for a long time. You succeeded just by getting over the fear of investing and we were like, “Just do it. Just do it. Just do it,” and everybody did good. It’s not so much just getting over the fear. Now you got to get over the fear and you got to be willing to take a couple lumps and you got to look for a deal very hard. This is a harder time to invest than any that I’ve seen. At the same time, the potential’s probably bigger than it’s ever been. Okay?
I bought a lot of real estate recently, and I know that when rates do come back down, these deals that were like meh, are going to immediately look amazing. And over time with inflation, I want a portfolio worth $50 million going up as opposed to a portfolio worth $15 million increasing with time. All right. At this segment of the show, we are going to share some of the comments on YouTube, and I want to share your comments. So if you’d be so kind, go to the comments section on the BiggerPockets YouTube page and tell me what you think about the show. Is it funny? Do you like it? Are you annoyed that I keep forgetting to turn the light green, or is the humor actually breaking up the show? Let me know.
Our first comment comes from Susan Owen. “David Greene, thank you for this episode is my favorite in two years of listening.” This comes from episode 723 that we did. “I really appreciate the advice you gave the veteran in this episode.” Well, thank you Susan and thank you to all the veterans who served our country and served your fellow Americans with what you did. Respect to you.
Next comes from Lexi York. “I love how real he keeps it!” With an exclamation point. That’s pretty real. “Too many social media influencers out there preaching fake news and misleading people.” Thank you, Lexi. That’s not something that you’re ever going to get from me. When the market was exploding and inflation was taken off, I was telling people, “You got to buy. You got to put your money somewhere.” And now that it’s slowed down, I’m telling people, “Take your time and pick a deal, but wait. Give yourself a long runway of this real estate you’re buying. Don’t expect it to perform immediately right away.” Hey, if we could take nine months to grow a baby in a womb and we can wait that long for the joy of having a kid, you could wait a couple years before your properties are going to be cash flowing really high.
All right. And from OmarKansas1, “Yes! So glad you listened to Nate Bargatze’s podcast. I liked you before, but you just jumped up lots of levels in my book, seeing him in Vegas on Saturday.” Thank you for that, OmarKansas. I love Nate Bargatze. He’s a hilarious comedian. Check out his Netflix shows. This is where we got the idea to read comments because I would listen to his podcast and listeners would say the funniest stuff and he would try to read it on the show. It was very funny. That’s why we do this here. So thanks for that.
Also, if you see Nate at the show, tell him to come on ours. We want to get Nate on the BiggerPockets podcast and learn about his story. If he invests in real estate, what he invests in, or if he just makes jokes for a living and has no idea to do what to do with money, go tell him about BiggerPockets and see if he would come on our show. We’d love to have him.
All right, if you didn’t know before we move on, there is a new YouTube show that I’ll be a part of, okay? This is on the BiggerPockets YouTube channel. We are going to be talking about people that want to make a career in real estate as opposed to just become a full-time investor. Do you have a question about how to grow in your current job? You want to work in real estate or you want to maximize your earnings? We’re creating a brand new YouTube show all about using your W2 to start investing and grow your wealth. Use biggerpockets.com/david and choose the job question on the form, okay? So if you want to be on this show, you go to biggerpockets.com/david. You submit your question, we try to get you on. If you want to go on that show, you go to the same place, biggerpockets.com/david and just click the box that says Job Question, and we can have your question answered on the other podcast.
So this is for people that love real estate, but they’re not ready to just jump in with both feet, quit their job and try to make it as a wholesaler. Okay? Sometimes making more money at your W2 is a good thing. Sometimes starting a business is a good thing. And I suppose if you think about it, becoming a wholesaler is the form of starting a business. It’s not a form of just becoming a full-time real estate investor and living off the rental income. It’s what I did. So if you love real estate and you love working and you love making money and you love excellence, go to BiggerPockets.com/david and leave me a question there.
All right. Our next video clip comes from Brian Lucy in Colorado.

My question is, I have a couple deals that are on our contract right now, and I would like funding for one of them specifically, but I have been trying to find private lenders that I can use that will fund the property. I’m trying to find out how I would go about vetting people that I find on Facebook. I’m a part of quite a few groups on Facebook and I want to make sure that these people are legit and won’t scam me out of my money because I’ve already had that situation happen once and it was a lot of money. So I’m wondering how do you go about vetting private lenders in order to find out if they are legitimate lenders. I’ve had one guy that told me to send him money prior to closing in order to do some administrative thing. I appreciate any help that you could help me out with this. Thank you so much, David. Love the show. Thank you.

All right, Brian, thank you for that question. First off, very sorry to hear you got scanned by somebody. There’s a lot of scamming going on. There’s people with fake Instagram accounts that are saying that they’re me that are not. I’m actually nervous about this because I think people will be sending links that look like they’re coming from me to get people to sign up for stuff that I’m doing and it’s not going to be me. So you got to be super, super careful about vetting places before you send money.
One way that I’ve recommended that people look out for that is to ask for a voice memo from me if you think it’s me that’s asking you for something, like, “Hey, can you send me a video? Can you send me a voice memo?” You know what my voice sounds like, that’d be harder to replicate. Now, as far as how this happened with a private lender, it should be done through a title company. Okay, the money should be going to the title company and they shouldn’t be releasing any of it until it’s an escrow. That’s the way that I would avoid this, is if you’re just sending money back and forth between people you don’t know, there’s no immune system there. There’s no protection for you. So I try to avoid that.
But frankly, I’ve never had a problem of having someone rip me off off because I’ve only borrowed money from people that either I knew or that knew me. I don’t ask them for anything. There’s no, “Send me this money for an administration fee before I give you a bunch of my money.” That just shouldn’t be happening, okay? If there is going to be closing costs from this private lender, they should be done through a title company and they should fund their portion of money that they’re lending you into the escrow account, and then you can fund your administration fee or whatever they’re charging you into that escrow account, and the title company can release your funds to them only after they have their funds for you.
You want to have a neutral third party that’s going to protect you if you don’t know the person. Very sorry that happened, but thank you for sharing that with our audience so that more people don’t get ripped off because I can see in the future, it’s so easy to make social media profiles. It’s so easy to pretend to be someone else. That wire fraud is going to become more and more prevalent.
All right. Our last question comes from Heather Cha in the Bay Area. Heather says, “I’m finally at a stage where I’m committed to investing but have to look out of state. I’m currently looking at Dallas, Indianapolis, Atlanta, and Jacksonville. I’m specifically looking for long-term rentals and I have close to 800 credit score with money saved up and no debt. As a first time amateur real estate investor, do you recommend finding something that doesn’t need renovation? I have rented my whole life, so I really have no experience working with contractors since I’m really looking for somewhere out of state. I have the added layer of stress of not being close to the market I’m looking in. Thank you for your time.”
All right, well, first off, Heather, if you’re in the Bay Area, reach out to me. You never know when you need real estate help in California, and I got you when that comes. But if it comes to long distance investing, check out the book that I wrote about that topic. And yes, quite frankly, if you don’t have experience investing in real estate or knowing construction or working with contractors, don’t take on an out-of-state project. This is one of the fastest ways that people can make big mistakes and lose big money. In fact, the people who do out-of-state deals that have renovations on their first time, if they don’t lose money, they just got lucky. This happens all the time. All right?
So I don’t want you to buy a project that needs renovation other than small things that a handyman can handle, and your agent has referrals and they can oversee the project for you if you’re not there. Instead, I would be focusing on trying to buy a vacation rental and have it managed by a company that actually has experience doing that. I can put you in touch with a property management company I use if you’re in the Jacksonville area. They do some short-term rentals. I’m trying to remember the name of the city where a lot of people are doing really well. It’s not coming to mind right now, but if you reach out to me, especially with you being a Bay Area native, I will do my best to connect you with people. I’ll be happy to support you and look for ways you can support me.
All right, everybody. That is our show. I want to know in the comments, did I talk to long? Do you like it when I talk longer? Are you okay with shows that go a little bit longer? Do you want to keep these super, super tight because you’re on a schedule? Let me know when the timeline, if you would like longer shows or shorter shows, as well as what you think about some of the rants that I went on. Did that benefit you? Did you learn about the principles of real estate? Or do you just want to get to the nitty gritty? We read these comments and we adjust our approach based off of what you’re saying. Thank you again for your time listening. I know attention is expensive and you guys could be learning from anyone, so I really appreciate that you’re here learning from me and us at BiggerPockets.
If you want to follow me and learn more about what I’m doing, you can go to davidgreene24.com, or you could follow me on social media @DavidGreene24 on Twitter, Instagram, YouTube, whatever it is that’s you fancy, you can find me everywhere. I’m going to be putting a retreat together in Scottsdale at the property that Rob and I bought. So if you’re into goal setting, check that out at davidgreene24.com/retreats. And also, guys, if you skip through the BiggerPockets ads, stop doing that. Listen to them because I run ads on the BiggerPockets Podcast, and I want you to hear about some of the products that you can get from me where I can help you. So if you’re like me and sometimes you skip through ads, don’t, because there’s Easter eggs in there. You might hear my sultry deep base filled, smooth voice telling you about some of the things that I have going on, how we can meet in person, and how I can help you with your goals. Thanks again. If you have a minute, listen to another BiggerPockets video. And if you don’t, I’ll see you on the next one.


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Single-family home purchase demand by investors remained steady in the fourth quarter of 2022, despite a dip in iBuying and larger investor demand, according to a report released this month by CoreLogic.

The share of investor purchases of single-family homes fell to 21% in June of 2022, but rebounded to 26% in September and has remained stable since that point, according to CoreLogic economist Thomas Malone.

“[T]he investor share plateaued in the fourth quarter of last year at around 2 percentage points lower than its high of 28% in February 2022; however, this is still much higher than at any time pre-pandemic,” he said in the report.

Broadly speaking, the market cooled for both investment buyers and owner-occupied buyers. Investment buyers purchased on average 81,000 homes, a 25% decline in activity when compared with the purchase activity observed in Q4 2021. However, this is in general alignment with investor purchase activity during Q4 of both 2019 and 2020, respectively.

“Owner-occupied purchases, on the other hand, are well below the levels seen during those years,” Malone said. “Overall, it appears that housing demand declined for both investors and owner-occupied buyers fairly evenly, with both likely deterred by high prices and elevated interest rates.”

So-called “mega-investors” appear to be retreating from the market quickly, but smaller players in the investment space (defined as those who own fewer than 10 properties) are making up an increasingly larger share of the investment activity in the homebuying space.

“Mega-investors’ share fell from 11% of investor purchases in September to 9% in December,” Malone pointed out. “In that same time frame, the small investor share rose from 45% to 48%. The medium investor share (those with 11 to 100 properties) remained steady, at around 35% of home purchases. Large investors (those with 101 to 1,000 properties) represented 8% of all investor purchases.”

Mega-players in the investment space are remaining active in the Atlanta Metropolitan Statistical Area (MSA), however, where it remained the only MSA with more than 10% of home purchases in Q4 2022.

“Aside from Memphis, no other MSA in the top 10 investment markets has a corresponding number of more than 5%, which makes Atlanta a major outlier,” Malone explained.

IBuying activity sharply dropped beginning in the summer of 2022, and remained depressed through the end of the year.

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California mortgage tech firm Blend Labs is focused on cutting costs and courting more users to its Blend Builder platform. The goal is to bring the firm to profitability after posting a net loss of $768.6 million in 2022. 

Blend’s net loss last year is more than four times the $171.3 million loss it incurred in 2021. The mortgage tech company reported an $82.1 million loss in the fourth quarter of last year, an increase of 13% compared to the third quarter of 2021, when the company posted a net loss of $73.1 million, according to the company’s financial earnings report.

“[The year] 2022 was an extremely challenging year for our industry, as we continued to see a sharp uptick in mortgage rates and margin compression for our customers,” Nima Ghamsari told analysts in its earnings call on Thursday.

The company – whose white-label technology powers mortgage applications on the websites of major lenders such as Wells Fargo and U.S. Bank – is now betting on its technology and is focused on cost reductions for 2023. Blend has not been profitable since going public in July 2021.

Its eyes are now set on driving users’ adoption of its Blend Builder platform, and the company launched “composable origination” technology this week, which will enable clients to build their own origination products. 

Blend’s partners can take full advantage of composable origination through the Builder Platform, which provides pre-built integrations with all of the major tech stacks used in the financial services industry — including core banking systems, loan originations systems, customer relationship management and online banking platforms

“We’re also working to make our mortgage offering available on the platform in all of our future offerings so that we can become the platform as a service company that we aim to be,” Ghamsari said. 

The adoption for LOs’ toolkit grew across all 10 features in the fourth quarter of last year, and Blend sees that trend continuing in the first quarter of 2023, Ghamsari explained. 

In the first quarter, Blend will see the full benefit of the cost-cutting actions it took last year and in January. 

After the company’s net loss of $133.98 million in the third quarter of 2022, Blend slashed about 28% of its workforce, — or roughly 340 jobs — in January. Since April 2022, the firm has eliminated more than 780 positions. 

The company expects to reduce the annual cost of revenue and operating expenses by more than $100 million on a non-GAAP basis by the year-end, Amir Jafari, Blend’s new CFO, told analysts.

“We expect to see sequential improvement in our operating loss and believe our Q1 operating loss outlook has us on track to surpass our net operating loss reduction targets for the year. I’m also happy to share that I expect Q1 will be the last quarter of our net operating loss,” Jafari said.

Blend’s financials 

Of the $42.8 million fourth-quarter revenue, Blend’s platform segment revenue came in at $29.5 million, down 19% year-over-year. 

“Our platform performance reflected a steeper than expected decline in mortgage origination activity compared to our prior expectations. We expect this to carry forward into Q1 2023 given the timing between lower Q4 application activity and the time of the loan funding when we recognize revenue,” Jafari told analysts.

The Title365 segment revenue posted $13.3 million, down 70% year over year. 

The decline in revenue reflected the continued decline of the refinance volume and migration of software-enabled title revenue from the Title365 segment to the Blend Platform segment, the firm noted.

In 2022, Blend’s platform segment revenue totaled $132.0 million, a decrease of 3% compared to the year ending on December 31, 2021. Title365 segment revenue totaled $103.2 million, an increase of 4% compared to the year ending on December 31, 2021.

Despite the staggering net loss, Jafari noted the firm’s “ample” liquidity.

As of December 31, 2022, Blend had cash, cash equivalents, and marketable securities totaling $354.1 million, with total debt outstanding of $225 million in the form of Blend’s five-year term loan. Blend’s $25 million revolving line of credit remains undrawn.

Blend expects its first-quarter revenue to be between $33 million and $35 million — and platform revenue will post between $24.5 million and $25.5 million. Its title business revenueis expected to post between $8.5 million and $9.5 million.

This forecast reflects Blend’s expectation that the first quarter of 2023 will be the mortgage origination low point for the year. 

Starting in the first quarter of 2023, Blend will modify its revenue presentations.

The mortgage tech firm will include all of its consumer banking products — such as deposits, home equity, credit cards, personal loans, and platform subscription access — in a single consumer suite lineup. 

For its mortgage business, the firm will consolidate revenues from its marketplaces and add-on products, like income and close, into a single mortgage suite lineup, which reflects its focus on expanding relationships with mortgage customers. 

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A group of 11 U.S. banks has agreed to make $30 billion in deposits at First Republic Bank to avoid another regional bank failure. The rescue comes after Silvergate Bank, Silicon Valley Bank and Signature Bank collapsed amid a liquidity crisis caused by a deposit run.  

“Today, 11 banks announced $30 billion in deposits into First Republic Bank. This show of support by a group of large banks is most welcome, and demonstrates the resilience of the banking system,” Secretary of the Treasury Janet L. Yellen, Federal Reserve Board Chair Jerome H. Powell, FDIC Chairman Martin J. Gruenberg and Acting Comptroller of the Currency Michael J. Hsu said in a joint statement.

The nation’s biggest banks – including Bank of America, Citigroup, JPMorgan Chase and Wells Fargo will each make a $5 billion uninsured deposit into First Republic, the banks announced on Thursday. Goldman Sachs and Morgan Stanley will deposit $2.5 billion each. Meanwhile, BNY Mellon, PNC Bank, State Street, Truist and U.S. Bank will contribute $1 billion each.

“Following the receiverships of Silicon Valley Bank and Signature Bank, there were outflows of uninsured deposits at a small number of banks,” the financial institutions’ group said in a joint statement. “The banking system has strong credit, plenty of liquidity, strong capital and strong profitability. Recent events did nothing to change this.”

First Republic Bank also said their board of directors has suspended its common stock dividend.

“The Bank is focused on reducing its borrowings and evaluating the composition and size of its balance sheet going forward. Consistent with this focus and during this period of recovery, the Bank’s Board of Directors has determined to suspend its common stock dividend,” the bank said in a statement.

First Republic, the fourth-largest non-agency jumbo lender in America, was exploring a sale or capital infusion, expecting to attract larger rivals, Bloomberg reported on Wednesday, citing anonymous sources with knowledge of the matter.

To fund its operations, the California-based regional bank announced fresh access to capital from the Federal Reserve Bank and JPMorgan Chase & Co. on Monday, making $70 billion available.

First Republic’s borrowing from the Fed increased from $20 billion on Friday to $109 billion on Wednesday. Meanwhile, short-term borrowings from the Federal Home Loan Bank have risen by $10 billion since March 9.

The bank also said insured deposits remained stable since March 8, but daily deposit outflows have slowed considerably.

Still, on Wednesday, S&P and Fitch Ratings downgraded the bank to “junk.” Credit rating agencies said First Republic’s deposits are focused on wealthy customers who are uninsured and less sticky in times of stress. In addition, the bank’s investment portfolio is concentrated in municipal securities, assets that have credit quality but are relatively illiquid compared to U.S. treasury and agency securities.

As of March 15, 2023, First Republic had a cash position of approximately $34 billion, the bank stated in a news release. The amount does not include the uninsured deposits from the 11 banks with an initial term of 120 days at market rates.

The bank’s stock closed at $34.25 on Thursday, up almost 10%. It was trading down 13% in the after hours.

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How is today’s housing starts data, which beat expectations, good for mortgage rates? Typically good economic data is bad for rates, especially in this environment, when a Fed member will come out and say building or buying homes is bad for fighting inflation. The answer is simple: The best way to fight inflation long-term is to add more supply.

Destroying demand is a short-term fix, but longer-term supply is the natural economic way. What we see in this latest starts report is encouraging, as a record number of 5-units are still in construction and anything that gets finished is positive against inflation.

As you can see, the 1974 recession destroyed the 5-unit construction production. Like most recessions, when demand falls, so does production. However, unlike the 1970s, when we had a boom in rents, which account for a whopping 44.4% of CPI inflation data, right now we have supply coming online.

I often talk about how today’s economy doesn’t resemble the 1970s, and the bond market never really believed it either, hence why the 10-year yield is below 3.50% today.

Regarding mortgage rates and bonds, since the banking crisis started with a run on Silicon Valley bank last week, bond yields have been heading lower and are now testing my Gandalf line in the sand of 3.42%.

If the 10-year yield closes below 3.42%, we will get more bond buying in the days after that key level breaks and I will feel more comfortable about mortgage rates falling. However, it’s been a struggle to break under this level. As you can see in the chart below, the lovely slow dance between the bond market and mortgage rates has been going on since 1971.

My 2023 forecast puts the range for the 10-year yield at 3.21% – 4.25%, which means 5.75%-7.25% mortgage rates. If jobless claims increase, meaning more people apply for unemployment benefits, mortgage rates and bond yields will go lower. 

That isn’t happening right now. Jobless claims and housing starts were both good today and the Atlanta Fed showed 3.2% GDP growth for the quarter. 

However, the bond market looks ahead, and the banking crisis here and worldwide is sending money to the bond market for now. We also have to remember Wall Street was heavily short on bonds, meaning that they make money when bond yields and mortgage rates go higher.

However, since the crisis started, they have had to cover their bets and flush more money into buying bonds than normal. This can explain some of the wild actions in the bond market over the last few days. 

Earlier Thursday morning, the 10-year yield was at 3.42%, but as I write this article, it’s 3.52%. We will see how mortgage rates get priced in such a wild marketplace.

Housing starts report

From Census: Housing Completions Privately owned housing completions in February were at a seasonally adjusted annual rate of 1,557,000. This is 12.2 percent (±15.0 percent)* above the revised January estimate of 1,388,000 and is 12.8 percent (±16.2 percent)* above the February 2022 rate of 1,380,000. Single-family housing completions in February were at a rate of 1,037,000; this is 1.0 percent (±15.0 percent)* above the revised January rate of 1,027,000. The February rate for units in buildings with five units or more was 509,000.

As you can see, the housing completion data has been a plodding turtle. The COVID-19 lag in production means we have a backlog of homes to get done, although more for the 5-unit space than single-family. The COVID-19 delays have served as a job program here in America, as labor is still needed to finish up the backlog of homes.

Many single-family housing contracts would not have been started if mortgage rates at the day of signing were at 6%-7%. With rates spiking so much so soon, the builders are working off that backlog today. Traditionally, completions would fall with permits, but this is not the case today due to the COVID-19 delays.

From Census: Building Permits Privately owned housing units authorized by building permits in February were at a seasonally adjusted annual rate of 1,524,000. This is 13.8 percent above the revised January rate of 1,339,000, but is 17.9 percent below the February 2022 rate of 1,857,000. Single-family authorizations in February were at a rate of 777,000; this is 7.6 percent above the revised January figure of 722,000. Authorizations of units in buildings with five units or more were at a rate of 700,000 in February.

The decline in housing permits paused in this report, but the trend is still your friend here, as I don’t expect any kind of meaningful rebound in housing permits until the backlog of homes is sold. As you can see in the chart below, today’s data looks different from the massive run-up in 2005 and the collapse.

From Census: Housing Starts Privately-owned housing starts in February were at a seasonally adjusted annual rate of 1,450,000. This is 9.8 percent (±15.5 percent)* above the revised January estimate of 1,321,000, but is 18.4 percent (±8.9 percent) below the February 2022 rate of 1,777,000. Single-family housing starts in February were at a rate of 830,000; this is 1.1 percent (±13.9 percent)* above the revised January figure of 821,000. The February rate for units in buildings with five units or more was 608,000. 

Housing starts data itself picked up today, and as always, with housing starts and new home sales data, we have to look back at the revisions, which were negative in this report. However, the recent new home sales data has improved along with builders’ confidence.

Overall, I like the report because it still shows that we will get more apartment supply. The future growth of 5-unit construction will be at risk if a recession happens. However, the key is we have more supply coming, which is the best way to fight inflation.

My rule of thumb for anticipating builder behavior is based on the three-month supply average. This has nothing to do with the existing home sales market; this monthly supply data only applies to the new home sales market, and the current 7.9 months are too high for them to issue new permits.

  • When supply is 4.3 months and below, this is an excellent market for builders.
  • When supply is 4.4 to 6.4 months, this is an OK market for the builders. They will build as long as new home sales are growing.
  • The builders will pull back on construction when the supply is 6.5 months and above.

As you can see below, In the last new home sales report, monthly supply data did fall from 9 months to 7.9 months, so we still have a lot of work to do here to get things back to normal.

On a positive note, the builders are feeling a bit perkier these days. Of course, we are working from a waterfall dive in demand, but it’s still positive that builder’s confidence has picked up.

Home Builder Confidence Index

This week’s housing starts and builders’ confidence report are positive for the future of mortgage rates. We are seeing inflation being fought in the right way with supply and lower mortgage rates, which means future housing production might be better than some thought once the backlogs are done. 

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First Republic Bank, the fourth-largest non-agency jumbo lender in America, is exploring strategic options, including a sale and a capital infusion, and is expected to attract interest from larger rivals, Bloomberg reported on Wednesday, citing anonymous sources with knowledge of the matter.

No decision has been made, and the bank can remain independent, people who requested anonymity for discussing confidential information said. According to Bloomberg, the bank is also weighing options for shoring up liquidity. 

In addition, the Wall Street Journal reported on Thursday morning that JPMorgan, Morgan Stanley and several other big banks are discussing a potential “sizable capital infusion,” people familiar with the matter said. A full takeover is also a possibility, but looks unlikely at this point.

Amid the liquidity problems affecting regional banks in the past week, California-based First Republic announced fresh access to capital from the Federal Reserve Bank and JPMorgan Chase & Co. on Monday, resulting in $70 billion available to fund operations.  

In a joint statement, Jim Herbert, founder and executive chairman, and Mike Roffler, CEO and president, said the bank continued to fund loans and process transactions. 

“First Republic’s capital and liquidity positions are very strong, and its capital remains well above the regulatory threshold for well-capitalized banks,” the executives said.

Still, on Wednesday, S&P and Fitch Ratings downgraded the bank to “junk.” Among the reasons for a speculative investment grade, First Republic’s deposits are concentrated on wealthy customers who are uninsured and less sticky in times of stress – the same problem that led Silicon Valley Bank and Signature Bank to collapse. 

The bank, however, says its consumer deposits have an average account size of less than $200,000, and the standard insurance amount by the Federal Deposit Insurance Corporation is $250,000. The bank said business deposits’ average account size is less than $500,000.

Meanwhile, First Republic had 61% of the book value of its investment portfolio in municipal securities at the end of 2022, a higher share than its peers. According to Fitch, these assets have credit quality but are relatively illiquid compared to U.S. treasury and agency securities.  

First Republic share was trading at $20.53 on Thursday morning, down 34.10% from the previous closing. 

The jumbo market

In the mortgage space, a potential buyer of First Republic Bank will inherit a growing non-agency jumbo loans production while the overall market has been in a downward spiral. 

According to Inside Mortgage Finance data, the bank was the only one to increase its volume among the top 10 non-agency jumbo mortgage producers in 2022. First Republic originated $31.6 billion last year, up 8% compared to the previous year. The estimated total for all lenders was $410 billion, down 36.3% in the same period. 

First Republic reached a 7.7% market share in the space last year. Wells Fargo & Co. is the leader in the category with an 11.1% market share, followed by Chase (9.3%) and Bank of America Home Loans (8.1%). 

Focusing on jumbo loans (greater than $726,200) makes sense if considering First Republic’s customer base. Founded in 1985, the bank offers private banking, private business banking and private wealth management. According to the bank, no single sector in the U.S. economy represents more than 9% of total deposits, with the largest being diversified real estate

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After pulling back at the start of the year, homebuilders jumped back in during February as homebuyer demand and builder confidence trended upward.

Homes were started at an estimated annual pace of 1.45 million in February, up 9.8% month over month, according to a report released Thursday by the U.S. Census Bureau and the U.S. Department of Housing and Urban Development (HUD).

Despite the month-over-month increase, housing starts were still down 18.4% year over year thanks to the annual pace of single-family housing starts dropping to 830,000, a decline of 31.6% year over year.

“The pace of new construction had been picking up over the past two years. In 2022, a total of 1.55 million new housing units were started, which is a little higher than the average annual new starts over the past five decades,” Lisa Sturtevant, the chief economist at Bright MLS, said in a statement. “However, the amount of new housing being built is still far below what is needed to meet demand and help moderate high prices.”

Unlike last month, multi-family housing starts were up both month over month and year over year, rising 24.1% and 14.3%, respectively, to a pace of 608,000.

As the pace of housing starts rose in February, so did the pace of completions, which were up 12.2% month over month and 12.8% year over year to a pace of 1.557 million. Although the pace of single-family completions was up 1.0% from a month ago, the pace of 1.037 million is still down 3.6% compared to a year ago. The pace of multi-family completions (509,000), on the other hand, posted massive increases both month over month and year over year, at 44.6% and 72.0%, respectively.

“Completions have outpaced starts since July 2022 and that will likely continue to put downward pressure on the number of single-family homes under construction. Builders may focus on completing existing projects, rather than starting new ones,” Odeta Kushi, First American’s deputy chief economist, said in a statement. “As the inventory of new, completed homes rises, it will provide some much-needed relief to a supply-starved market and put downward pressure on new-home prices.”

Although homebuilder sentiment in sales expectations for the next six months did drop slightly in the most recent  National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) report, building permits are starting to trend upward, at least on a monthly basis. In February, building permits were issued at an estimated annual pace of 1.524 million, up 13.4% from a month prior, however this is still down 17.9% year over year.

“Single-family housing permits, a leading indicator of future starts, also increased 7.6% compared with the previous month,” Kushi said. “The uptick in single-family housing permits and starts aligns with the recent increase in homebuilder sentiment.”

Despite this uptick, experts are still just cautiously optimistic thanks to the volatile mortgage rate environment and financial system stress.

“If interest rates come down, homebuilders could find it easier to finance new projects. But there are other challenges,” Sturtevant said. “Banks, and particularly regional banks, have been under pressure after the recent collapse of Silicon Valley Bank and Signature Bank. Homebuilders often depend on financing from these regional banks. Instability or other disruptions in the banking industry could reduce building activity this spring just as homebuilders want to be ramping up.”

Regionally, housing starts were up month over month in the South (2.2%), the Midwest (70.3%) and the West (16.8%) but were down 16.5% in the Northeast. On a yearly basis, homebuilders’ housing starts were down in all regions, with the Northeast posting the largest annual decline at 20.9%.

The increase in housing starts is reflected in the homebuilder outlook recorded in the BTIG/HomeSphere State of the Industry Report.

According to the survey, 51% of builders saw a yearly decrease in sales last month, down from 54% in January. Despite a 51% yearly decrease in orders, builders again reported a slight improvement in performance relative to expectations, with 27% of respondents reporting that sales were better than expected, and 21% reporting that sales were worse than expected. These metrics improved from 21% and 38%, respectively, in January.

The BTIG/HomeSphere study is an electronic survey of approximately 50-100 small- to mid-sized homebuilders that sell, on average, 50-100 homes per year throughout the nation. In February, the survey had 98 respondents.

While sales are improving, builders are still using incentives to generate traffic, however 27% of builders reported that they raised some, most, or all base prices in February. In addition, 23% of builders reported increasing some, most or all incentives, down from 30% a month ago.

“Although still sluggish, business conditions are showing some clear signs of improvement as we begin the spring selling season,” Carl Reichardt, a BTIG analyst, said in a statement.

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