The Real Cost of Buying Your First Home

Transcription

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Pete: As a first time home buyer, what are some of the things that you've seen come up, or what are some of the things that you help your buyers avoid? In other words, potential risks or potential things wrong with the property, I mean, what are some of the things that you can help a first time home buyer with? 

 

Matt: Yeah. The first thing is, you know, when you're first looking at properties, and maybe it's the first one you're showing them, you can try and get a feel for exactly what they like and everything, but ultimately you do want to point out, hey, this is gonna be your first home.

 

Pete: Yeah.

 

Matt: I remember when I bought my first home and I wish I would've done it a little bit differently. I wish I wouldn't have bought such a fixer-upper, because when you are buying your very first home, you don't wanna be overwhelmed when you move in that you got to do a ton of stuff. So my first thing is to encourage them to say, hey, why don't you find something, maybe there's some cosmetic things, but don't buy a complete fixer-upper because you don't wanna get overwhelmed once you move in.

 

Pete: So I have Matt Metz here and you are my older brother. I had my younger brother Dan on yesterday.

 

Matt: Did you? Oh, great.

 

Pete: Yeah. So he was here yesterday. Dan, we talked a lot about the listing, what that job responsibility is and how that affects the whole real estate process.

 

Matt: Yeah.

 

Pete: So you help buyers and tell us a little bit about how you got into real estate.

 

Matt: Well, like you said, Dan was in here yesterday. Seems to, he... I followed in his footsteps pretty much everything in real estate. So Dan had a huge part to play for me getting in the business. You had some too, encouragement. So yeah, I was in a job, a really good job. I'm a design draftsman working 8:00 to 5:00, decided, I saw my brother and you making good money doing sales and you started doing sales and I saw you work your way up, so I decided, hey, I should probably get into the business.

 

Pete: Yeah. Nice.

 

Matt: And Dan had a huge part to play in that, so yeah. He invited me to sit down with him and a broker, and we kind of went from there. And I've been following Dan everywhere he's gone since then.

 

Pete: Well, you've been crushing it, you've been crushing at work with a lot of buyers. So you... So for our listeners, so Matt works with mostly buyers.

 

Matt: That's true. Yes.

 

Pete: And you've helped a lot of first time home buyers.

 

Matt: A ton.

 

Pete: And you probably have a bunch right now you're working with.

 

Matt: Yeah. Most of the buyers right now in the market are, I feel, are first time home buyers.

 

Pete: Yeah. And so this podcast, the majority of the listeners is geared for first time home buyers. So the content I wanna talk about today is mostly for first time home buyers, so keeping it geared for those buyers and basically sharing your experience and your knowledge on how you can help first time home buyers and some of the things that they can watch out for.

 

Matt: Sure.

 

Pete: When did you actually get into real estate? 

 

Matt: 2012 I got my license.

 

Pete: I didn't realize it was that... It was back in 2012.

 

Matt: 2012.

 

Pete: That's right. That's right.

 

Matt: Oh, it was when I was living in...

 

Pete: So 10 years.

 

Matt: Yeah. Living in Chico.

 

Pete: 13 years.

 

Matt: Yeah. Living in Chico, just had my first born. My first showings I remember holding Bennett.

 

Pete: Wow.

 

Matt: Baby boy, and then started showing property.

 

Pete: Wow. In Chico? 

 

Matt: In Chico.

 

Pete: Okay. That's right, I remember.

 

Matt: Yeah.

 

Pete: Yeah. You had... Yeah. And when you started, oh, you were working with...

 

Matt: I was working with Cory Meyer.

 

Pete: Cory Meyer. Yep.

 

Matt: And he got a couple of agents down in the Chico area.

 

Pete: That's right, I remember. Yeah.

 

Matt: And we kind of went for it. Yeah.

 

Pete: Okay. Cool. So I have some questions here for you. And the market's crazy right now. What are your feelings right now on the real estate market in general? 

 

Matt: I hear a lot of buyers say the market's crazy right now, and they're trying to get me to agree that the market is crazy right now.

 

Pete: Right. And when they say crazy, what do they mean by crazy? 

 

Matt: Crazy meaning, they're always mentioning the interest rate. That's the number one thing we get or I get is interest rate. "It's a horrible time to buy, right, Matt?" And then I'm like, "Well, if you look at it like this, maybe it's a good time to buy. It depends on how you're gonna approach it." So when somebody comes at me with a crazy market, I usually try and find out what they think is crazy.

 

Pete: Oh, I see. So you kind of qualify. What does it mean to you? Yeah.

 

Matt: Qualify what crazy means to you and, obviously, it's not what it was two, three years ago.

 

Pete: Yeah. That was a crazy market.

 

Matt: That was a crazy market.

 

Pete: That was very crazy.

 

Matt: That would've been a great crazy for people that took advantage of it when they could have.

 

Pete: Well, I remember two years ago talking to potential buyers and they're like, "No, we're not getting in."

 

Matt: Right.

 

Pete: Because they're like, prices are too high and there's too many people bidding, we don't want to get in right now.

 

Matt: Right. I had a lot of people saying that they were, you know, waiting for the perfect home to come along. And they waited and they waited and they waited, and now they wish they would not have waited.

 

Pete: It's hard, yeah, it's hard. And some did buy.

 

Matt: Some, a lot of people bought. We were very busy, very blessed to be busy during that time, and still blessed to be busy now.

 

Pete: As it relates to first-time home buyers, I'd like to start off by talking about what is a buyer's agent compared to a listing agent. Me and Dan talked about this yesterday a little bit...

 

Matt: Sure.

 

Pete: But what is the role of a buyer's agent and how does that help a buyer and/or a first-time home buyer? 

 

Matt: Yeah. So a buyer's agent to me is somebody that's helping people go out and find that ideal home. They are listening to a lot, hopefully listening more than they're talking when they're working with the buyer, you know, finding out what these people are really wanting in their next home or their new home or their first home, it's definitely listening to their needs and their wants.

 

Matt: And I think the more you listen to the first-time home buyer, you're gonna learn a lot about them and you're also gonna learn their motivations and where you can kind of help guide them down a path that they're going on and they're gonna go on it whether you're there or not. And it's a matter of what you have to offer service-wise to see if they wanna use you as their buyer's agent.

 

Pete: So what I heard you say is a good buyer's agent that's helping buyers find a home is a really good listener. Finding exactly what their goals are. Each buyer has different goals, each one is very different from the other and so what you're saying is really listening, slowing down, listening to exactly what they need.

 

Matt: Absolutely. I think that's key to building any relationship, whether it's a first-time home buyer or somebody you meet. It's like you always wanna listen to their story and try and help them.

 

Pete: Yeah. In addition to that, what else do you help first-time home buyers do? I mean, think of a buyer that has no idea.

 

Matt: The best thing you can do with a first-time home buyer is get them into the office, and have a sit down with them. Not a lot of people are doing this out there, but getting them in a space where they can actually sit down and you can have a chance to discuss what their goals are. If you're doing it at the property, it's much more difficult to get their concentration, and/or there are a lot fewer distractions than when you're sitting in an office.

 

Pete: Yeah, it makes sense.

 

Matt: And you can pull up anything up on the computer.

 

Pete: Yeah.

 

Matt: Anything that comes up in a conversation, hey, why don't we take a deeper look at that? And then having a good presentation is huge of what they're going to expect in the process. A lot of buyers, first-time home buyers, have no idea what to expect. Let them know, hey, we do help you with the inspections, we help you with lenders or different things that are gonna help you buy that home and you're not gonna have a lot of things to worry about. So that we're kind of handholding them through the process and we're not gonna let them go or falter along the process.

 

Pete: I love the part that you said about expectations, because a lot of buyers, just don't know. Like they don't know, like if it's your first time doing something, you don't know what you don't know. And so working with a buyer's agent like yourself, they're gonna have to have a lot of trust because there's got to be a lot of trust and working with someone that really knows what they're doing. Working with you for this many years, I know you know what you're doing and you help a lot of families. There are a lot of families that you help.

 

Pete: What I was gonna say about that is that experience goes a long way, experience of knowing the market and experience with looking for things that could come up, which kind of leads me to my next question, as a first-time home buyer, what are some of the things that you've seen come up or what are some of the things that you help your buyers avoid? In other words, potential risks or potential things wrong with the property, what are some of the things that you can help a first-time home buyer with? 

 

Matt: Yeah. The first thing is, when you're first looking at properties, and maybe it's the first one you're showing them, you could try and get a feel for exactly what they like and everything, but ultimately you do want to point out, "Hey, this is gonna be your first home." I remember when I bought my first home, and I wish I had done it a little bit differently. I wish I hadn't bought such a fixer-upper because when you are buying your very first home, you don't want to be overwhelmed when you move in that you have to do a ton of stuff.

 

Pete: Yeah.

 

Matt: So my first thing is to encourage them, to say, "Hey, why don't you find something? Maybe there are some cosmetic things, but don't buy a complete fixer-upper because you don't wanna get overwhelmed once you move in." But that's...

 

Pete: That's huge.

 

Matt: It depends on the person and what their goals are, but ultimately, first-time home buyers are fun to work with. I sometimes prefer working with first-time home buyers because they don't know anything. So you're the guide along the way and you can kind of help shape what...

 

Pete: Help, yeah.

 

Matt: Where they're gonna go and what they're gonna do. And then to see them find that ideal home is pretty cool.

 

Pete: Working with an experienced agent and seeing many, many homes, this is what I told many first-time home buyers and really any buyers, you want an agent that is in a lot of homes and sees a lot of issues with properties. You can...

 

Matt: Yeah. I can spot the issues with the property, I can.

 

Pete: You walk into the property, you say, oh, look at the roof, or look at the gutters, or look at whatever is going on. You know what you're looking at, but first-time home buyers might not know what they're looking at.

 

Matt: Yeah. My background was in construction and design. So I always have had a feel for what I'm looking at when it comes to homes, designing homes, building homes, and things like that. So I had a lot of experience to lean on when I'm showing people the first time homes, for the first time.

 

Pete: Yeah. First time.

 

Matt: Yeah.

 

Pete: That's awesome. No, I think that's great. The other question I have is, obviously it is a different market than what we were a couple of years ago and there are homes on the market, how do you decipher what families you're working with? They have a goal in mind that they're looking at, maybe a price range.

 

Matt: Correct.

 

Pete: Are you looking for, maybe it depends on the person, but I guess the question is how do you find the properties for first-time home buyers? 

 

Matt: It depends on how they come into my, and how you meet me.

 

Pete: How did you get them? Yeah.

 

Matt: How I get them, how the lead comes in, or who I'm calling, but I usually, for a first-time home buyer, get them into the office first and then show them a bunch of homes on the computer through the MLS and showing them what their options are, what areas they like to be in, how much do they know about Redding? Are they a first time to Redding or are they, they know the area? That's huge. You're trying to narrow it down to their budget. Budget is huge for first time home buyers. That's probably the number one thing that they're concerned about.

 

Pete: Budget. Yeah.

 

Matt: Because they've never owned a home before. They want to, they're going from renting to buying and it's like they wanna be able to afford it, number one. And so with your help, I've helped a lot of first time home buyers afford that first home, so.

 

Pete: Yeah, the financing is completely separate.

 

Matt: Totally.

 

Pete: I mean, you have two major things. You're getting a mortgage, debt's gonna be a big mortgage, a long-term debt that they're gonna borrow for 30 years. It's the biggest financial decision they'll make. And then they have this asset, this home that they now have to take care of. It's gonna be a lot bringing those together for someone who is doing it for the first time.

 

Matt: Exactly.

 

Pete: It's a big decision, which is why I'm doing this podcast because my passion and my heart is to really get some education out there and to help as many first time home buyers as we possibly can.

 

Matt: Yeah. Today I showed a first time home buyer about an hour ago. The first time I met him we went to one home and I could tell he didn't really understand the process 'cause he wanted to, "Hey, let's negotiate right now."

 

Pete: I see.

 

Matt: "Let's negotiate before we actually get into contract." And it's sometimes difficult to agree with a buyer, but yet disagree when you're trying to say, hey, there is a time for this, but not right now.

 

Pete: That's a great segue. Let's talk about that. So you had this buyer and he wanted to negotiate with the seller like right away before he went into contract.

 

Matt: Exactly. Yeah.

 

Pete: What does going into a contract mean? Start there.

 

Matt: Going into contract means that you made an offer and then you're gonna send that over to the other side or the listing agent.

 

Pete: It's a written offer.

 

Matt: It's a written offer. You fill it in, you fill in the price, the terms, and then you're going to present that or you're gonna have that selling agent present that to their client.

 

Pete: So you as their realtor helping the buyer, you'll help them fill out this offer.

 

Matt: I help them fill out the offer, I go over all the... All the things, all the terms. The main, we try and narrow it down to the main points, and offer price.

 

Pete: I see.

 

Matt: Credits.

 

Pete: Yep.

 

Matt: Deposit, warranty. And if you can nail down and then anything that you want included in that offer, those are the biggest things you're gonna try and nail down first. You fill that in on the contract, you send that over, and you get three days for them to respond by default. I usually have a strategy of trying to increase or decrease that time limit so that other offers don't come in.

 

Pete: Decrease the amount of time for the seller to respond to that offer. 

 

Matt: To respond. Yeah. Not something that's gonna turn them off, but something that's gonna help them just make a decision sooner.

 

Pete: Yeah. So you had this buyer and what he was wanting is he didn't necessarily wanna make this offer. He said, "Hey, what does the seller want for the price? Let's find out what this is and see if we can negotiate."

 

Matt: Yeah. He actually wants to talk to the seller. And I said, "Well, this isn't quite how this works in this market right now."

 

Pete: Sure. Yeah.

 

Matt: "How about we come up with an offer that you're comfortable with, and let's negotiate a price that you're willing to offer."

 

Pete: Yeah. I think a lot of buyers and first time home buyers, I think they think that once they've made the offer, like that's the final, it's over.

 

Matt: They think it's over.

 

Pete: And it's not gonna, they've just bought a house. If they accept, they've just bought a house, and oh my goodness.

 

Matt: Correct.

 

Pete: They sleep on it and the second.

 

Matt: Because in some states that's the way it is. Once the offer's there, it's, in some states, it is over.

 

Pete: Yeah. I actually didn't know that was different in other states.

 

Matt: Yeah. In other states it's different.

 

Pete: Okay. And California's different.

 

Matt: Correct.

 

Pete: Explain that? 

 

Matt: I'm licensed in California. California has a really good contract, in my opinion, of making an offer. It's more geared toward the buyer than the seller. 'Cause once the seller accepts, it's much harder for a seller to back out than a buyer.

 

Pete: Interesting. I didn't know that.

 

Matt: In Oregon, it's geared for both, to my understanding. You make an offer, that's the offer. And just from the experience of listening to others who have worked in Oregon and/or done business up there, it's much different.

 

Pete: What I also know is that once they make the offer, a lot of buyers think, "Oh, I just bought this house." But after they get the accepted contract, most of the negotiating starts or can start.

 

Matt: It can. You have 17 days to inspect any property, California contract.

 

Pete: So what is the 17 days? Go ahead and explain what that is.

 

Matt: It's called your inspection contingency period where you can actually have 17 days to inspect any property. You can do your due diligence, you can have any inspections you want.

 

Pete: So let's say I'm a first time home buyer and I come to you and you write... I love the house and the house is listed for 350,000, let's say. And I love the house. I say, "Matt, let's go ahead and make an offer." Let's say we offer 350, let's say 340,000. They accept the offer, okay? At 340,000. Now as the buyer, I'm like, "Oh crap, what did I just do?" So what you're saying is that you didn't just buy a house, you just started the process. And now what I like to explain to buyers is it's just you and the seller now negotiating. There are no other buyers that can come in and take.

 

Matt: Yeah. You got your foot in the door.

 

Pete: Take the property away during this time. So when you said contingency period, explain what the contingency period is, because I think that's important.

 

Matt: Sure. Contingency period, you have three contingencies, but this one is for inspection that I'm talking about the 17 days. That mainly is for you to inspect the property. And if you decide in that 17 days, you decide that it's not the best property for you and/or you found some things that you don't like about the property, you can back out and alls you're gonna be out is your, the money that you put in for the inspections.

 

Pete: Okay. So, I just bought it. I just made an offer, they accepted, and I get my home inspection, I get maybe an appraisal, and all of a sudden you find something wrong with the house. Uh-oh, I can decide, even though I'm in contract, I can say, "Hey, I don't want this house anymore."

 

Matt: Correct.

 

Pete: Or what can that buyer do? Can they negotiate a lower price? Maybe negotiate lower credits? 

 

Matt: Yeah. Well, I always encourage the buyer to do this, don't just back out straight away. Hey, let's see if they're willing to play ball with you and maybe find a compromise between the two. And see, hey, it does need a roof, how about we negotiate a roof? And worst case, and I try and set good expectations on that, they're not gonna give you the whole roof. Maybe they'll give you 50%, maybe they'll give you a little more.

 

Pete: But at least ask.

 

Matt: At least ask and worst case they say no. Then you can either make a decision but these small decisions all add up at the end and hopefully, everybody's happy.

 

Pete: Yeah. I love that. I love that. I want to tell a story. So I bought, it wasn't my first time, but I kinda of used this strategy to buy a house back in 2013. I knew the home wasn't gonna appraise for what I was making the offer for. Now, this is the time when there were multiple offers on the property. Right now, there are multiple offers, but there are more offers on this property. I loved this property. And there was a price, it was listed for 425,000. And I wanted this house. And I knew, I wanted to be the highest bidder, but I knew, so what I did was I offered 515,000.

 

Pete: I went like 75,000 more, but I knew that the home wasn't gonna appraise for this much. And you have to be careful because this particular house was owned by the bank, so it was owned by the bank, and so the bank, actually, I knew that the bank was going to have to lower the price, but the same thing would apply for an inspection or something with negotiating after you're in contract, you can negotiate the price after, you can negotiate other terms after you're in contract.

 

Matt: Yeah. Usually, the appraisal is something that we always talk about, try, and discuss with the first time home buyer. Because a lot of the time they are gun shy with, if there are multiple offers, hey, I don't want to get in... I hear it many many times, I don't want to get into a bidding war. Don't want to get into a bidding war. I'm not into bidding wars. And the biggest challenge there is the mindset. If their mindset is I don't want to be bidding up on a property, it's not that it's gonna get bid up, it's that, hey, you gotta get your foot in the door to have a chance at this property. But let's get your foot in the door first.

 

Pete: And there are strategies around a bidding war.

 

Matt: Totally.

 

Pete: There are many strategies. And so, like in this example, there were four other people who made offers on the same property, which is why I went to 500,000. So they ended up picking me as a buyer because I went up to 500. I got an appraisal, and the home was only appraised for 450. So then we got it dropped down to 450. The home was listed for 425. There could have been another buyer that offered 470 for that house and I got it for 460. So that's what happens when you go into a contract with a seller. You start that negotiating with your inspections and there might have been another buyer that lost out because you at least got your foot in the door like you're saying.

 

Matt: Yeah. Once you get that acceptance on that contract, now it's time to really get to the nitty gritty and play ball and get your inspections. We're trying to get the inspections ordered within the first seven to 10 days so that we have a little extra time to negotiate afterward. That's key. Working with Josh Barker Real Estate is probably super ideal.

 

Pete: Which was, I was going to say that because working with an agent that knows this, that understands this, that does this day in and day out, day in and day out with a super high level of expertise and knowledge to be able to help these buyers, it's huge.

 

Matt: Yeah. It comes down to what we, the experience we have obviously, but also we want to help them. The ultimate goal here is to help people. And if they feel like they're getting help from you, you're going to have a client ultimately with a first time home buyer.

 

Pete: What kind of advice would you give? Let's say, I'm a first time home buyer and I give you a call and I say, hey Matt, I'm looking and it's my first time. I don't know if I should buy it yet in this market. Interest rates are high, and I can afford to buy, but there's nothing out there I really like, I am a first-time home buyer, and I do want to eventually buy a house. What would you tell a buyer? 

 

Matt: Front and foremost, I would try and get them face to face with me to get a better understanding of where their situation is. I wanna know their story, I wanna know their situation and what's gonna be the best for them. If they're really a few months away, I'm not gonna push too hard that, if there are conditions there that I can't surpass or they can't surpass. It's more about finding out what their story is and then going from there.

 

Matt: But getting face-to-face really helps. So the first thing I would be like is, hey Pete, why don't we sit down for 15 to 20 minutes, have a conversation about what buyers are doing in this market right now to get really good homes at really good prices, and show you the advantage of purchasing now versus later. A lot of people right now are putting it on the shelf for the holiday. Do you want more competition or less competition in this market? 

 

Pete: Let's talk about that. So what about the holidays making a difference for a first-time home buyer? 

 

Matt: People are very busy. People have a lot of family going on, a lot of. They're traveling. They're doing this. They're doing that. And not a lot of people are thinking, "Hey, let's... "

 

Pete: Buy a house.

 

Matt: Yeah, buy a house and move. Whether they're renting or whether they're stepping up or stepping down, it's like the holiday season is usually not the time they're gonna want to do that, so.

 

Pete: Yeah, I don't necessarily want to move my whole family after Thanksgiving and before Christmas.

 

Matt: Yeah. School is another big thing with kids. So I put myself in their shoes. Could I get a better deal during the holidays? Absolutely, I think. And I believe that.

 

Pete: Yeah. Well, it's proven, I'll put the...

 

Matt: It's not necessarily a better deal. It might be better. You might have more options.

 

Pete: Or maybe find that dream house that wouldn't be... Maybe that house doesn't have any offers, or in the summer it'd have five, or six offers and get betted up. It happens every year. And I'll put this graph up, but every single year inventory rises in the winter, in the winter months in every single year. In the summer months, inventory comes down. And that's because people move when they don't have school; they're less busy, and that is when people move. And so obviously it's hard to move during Christmas and Thanksgiving, so that makes sense. But what you're saying is you could potentially find a better deal during the winter, winter months? 

 

Matt: Yeah. When you're buying a home, you don't want to follow the crowd necessarily when everybody else is buying. Do you, want to be a buyer with everyone else, or do you wanna buy when nobody else is buying? 

 

Pete: I like that. Yeah.

 

Matt: It depends on the reasons, but ultimately, you want to try and get a good deal while there's not less competition.

 

Pete: Yeah. Are there good deals going on right now? 

 

Matt: There are some good deals out there. I just came from one. I can't believe it's not sold.

 

Pete: Tell us about it.

 

Matt: The home is on Delightful Way. It's got a 360-degree view.

 

Pete: Delightful? 

 

Matt: Yeah, Delightful Way. The first question you get asked a lot is, when you show up to a home, why isn't this sold yet? This seems like a good deal. Everybody's different when they come into a home.

 

Pete: What's it listed for? 

 

Matt: 365. Yeah, it's 365. It's a delightful way. It's on top of a mountain. It's got some acreage.

 

Pete: Really? That does seem like a great deal.

 

Matt: Yeah. I can tell you why it hasn't sold. There are two stories. The second story is a one bedroom and it's got a circular staircase, a metal staircase going up to it.

 

Pete: Oh, I kind of like those.

 

Matt: So it's not ideal friendly for families.

 

Pete: With kids and stuff like that.

 

Matt: So that's going to knock out a lot of families. And there's some pretty big elevation drop around the property.

 

Pete: Oh, wow.

 

Matt: So with kids and no fencing, that's gonna probably knock out a lot of people with kids.

 

Pete: I see. Got it.

 

Matt: This is more of your...

 

Pete: How long has it been on the market? 

 

Matt: I would have to check. I don't remember. It's been on for a little while.

 

Pete: Okay. So that's a good deal? 

 

Matt: I think it's a good deal. It's a three-bedroom. Some of these properties that I get to show are pretty cool. This was one of them. I've only shown maybe three or four homes this year that were like, whoa. And this was one of those, oh wow, this is cool.

 

Pete: This is a good deal.

 

Matt: Yeah.

 

Pete: This is a couple of questions just regarding higher interest rates and affordability. I know that's a challenge. What would you tell a first time home buyer? Help with a first time home buyer that they want to buy, but affordability is expensive. It's challenging for them, but they want to get into a place, but with higher interest rates. 

 

Matt: Yeah. It comes down to what they can afford. If they can afford to get into a home now, I always tell them the best time to buy real estate is when you can afford it. And if you're a first time home buyer and you can pull, and get a position in the market, it's much better than 100% interest on a rent. And it's hard to find a good rental in Redding.

 

Pete: Why is that? 

 

Matt: Because we have a good rental market in Redding. Are you familiar with the market here? It's, there's a Lot.

 

Pete: Yeah, I know. I know.

 

Matt: I know, you know.

 

Pete: I know, yeah.

 

Matt: So it's definitely, that affordability is driving rentals.

 

Pete: More population, rentals, and, yeah.

 

Matt: Because if you can't afford to buy, which many people can't right now.

 

Pete: They're renting.

 

Matt: They're renting.

 

Pete: And that's driving your rents up.

 

Matt: Yeah. So if those renters have good jobs, good work history, low debt to income, and they can buy, I always think it's a better time, the best time to buy. So that's kind of what I shoot for if this person is going to be approved to purchase. If they're approved and their motivations are good, then let's find you a house, and let's do it quickly.

 

Pete: Yeah, for sure. I agree, 100% agree with that. What I tell the buyers I work with is if you can afford a payment, if you can afford it, then get in as soon as possible.

 

Matt: Yeah. And if you have to cut out Starbucks and the car wash and different things that you're going to spend money on, there's a lot of people out there that can't afford homes, but if they have all that frill that they're spending every month and decided not to spend it, they could afford a home.

 

Pete: Yeah. So the average payment right now for, let's say, if you wanted to buy a $350,000 home for a first-time home buyer, payment for 350,000 is about 3000 a month. For 300,000, it's about 2,500 a month, for 300. So, let's say someone's renting for 1500, I did the math on this. If someone's renting for 1500 and they wanna buy for let's say 300, they're gonna spend an extra $1,000 a month. I did the math, but not that math. That's easy math.

 

Pete: But that extra $1,000, what do they get for that? And I was kind of looking at it, and obviously, it's the timing. And so if you can afford that 2,500, I say go for it. The reason why is that home values continue to be appreciated. And in Redding, the average over the last 10 to 15 years is about 5%. If you go back to 1942, home prices have appreciated on average, almost 5% per year. And that's huge, 5% of 300,000 in one year is how much? Five times... 5% would be $15,000. Right? 

 

Matt: Of 100,000? 

 

Pete: Of 300,000.

 

Matt: Oh, okay.

 

Pete: Yeah, 15,000. So, in the first year, you have $15,000 of equity. That's 5% appreciation. So, they also get the amortization. So what I tell buyers that do want to get in the market right now is, hey, you're paying 1500. Your landlord does not just say, "Hey, congratulations, we're gonna lower that rent for you this year." Or, "Hey, congratulations, we're gonna keep the rent the same." They're not going to do that. Every year, they're going to increase that rent of what they're legally able to, I think in California, it's like 5% every year it can go up. Well, on a mortgage, it's fixed. You are locked in your housing. When you buy a house, that's locked in.

 

Matt: You're not going to have an increase in rent next year.

 

Pete: You're not going to have an increase in your mortgage.

 

Matt: Yeah. Ultimately, the only way it could go up is if insurance goes up, taxes go up.

 

Pete: Homeowners' insurance and property tax. But if your property taxes are going up, your home value's going up. Actually the opposite is true because on a mortgage, you can lower that payment. And this is what a lot of first-time home buyers don't understand is that rates go up and they come down. I don't know exactly when they'll come back down, but eventually they'll come back down, and there'll be opportunities to lower that payment down and become more affordable. So I'm going to tell you a story. So when I bought my house, it was only 130,000. It was a brand-new build. It was back in 2001.

 

Matt: I remember.

 

Pete: And at the time, we had just come out of the.com crash, and people lost their retirements, and the stock market was down a lot. We had 9/11, and it was a scary time. Well, I was making about $2,500 a month working for Verizon Wireless, and my mortgage payment was about 1100. It was like 40-something percent of my income, which is scary. It was scary for me. Well, I ended up doing it, and I think my interest rate was around 7%. And I got in, and yeah, it was hard that first year, two years, hard. And I didn't do the Starbucks like you're saying, and I didn't do the extra stuff, but...

 

Matt: Yeah. I remember canceling my Verizon bill. I got rid of my cell phone. So that's $200 right there.

 

Pete: Yeah. And so over time, what happened was my income increased, and the interest rates ended up coming down. I refinanced, but if you're in the market to purchase, if you're a first-time home buyer, if you're not on... Fixed income is different, but if you're a working W-2 employee or something, most of the time, their income's going to continue to rise, but that payment's going to be staying fixed. And this is why rent continues to go up because wages continue to increase. I see why that's super important for first time home buyers.

 

Matt: Yeah. And my first home-buying process was not a great story, I bought it in '07.

 

Pete: 2007? 

 

Matt: In 2007, Josh Barker was my agent. He showed me three homes, four homes, and three homes, and I bought one of them. I bought it for 299,000. And the next year, we all know what happened then: the market crashed.

 

Pete: Yeah. I was living with you. I moved in with you.

 

Matt: Yeah, I remember. But even then, I was still excited about buying. Even though I did have to short-sell my house, my first home. It didn't make me wanna stop being a homeowner, I wanted to get back in the market as soon as possible. So it took a while, six or seven years before we bought again, but it definitely is the only way to really gain wealth when you're young.

 

Pete: Real estate.

 

Matt: Yeah, real estate. I mean, it has to be one of the top things to do to gain wealth quickly.

 

Pete: Yeah, I remember that time. Do you think we could have another 2007? 

 

Matt: I don't see how we could have it in the real estate market. We might have it in other world arenas, but not necessarily in real estate.

 

Pete: And why is that? 

 

Matt: It's something tangible, something you can put your hands on, and something you own. I think right now, I think the biggest risk is credit card debt. I think that's got a risk for people. A lot of people have equity right now. Why would they walk away from equity? They would just sell.

 

Pete: And they didn't back in 2007. People didn't have equity.

 

Matt: Right. They didn't have equity. So now they have the equity, now banks are a lot tighter these days, their income is a lot more strict, the two years and this and that. So I don't see it just bubbling at all. I don't know, I think most people would agree that we're not on a bubble...

 

Pete: Yeah, I agree.

 

Matt: For the real estate market.

 

Pete: Yeah. For a bubble, we need houses.

 

Matt: We need inventory.

 

Pete: Yeah. Houses.

 

Matt: A lot of inventory. Yeah. What was the inventory? Do you remember when?

 

Pete: 2007. Well, I remember the inventory getting up to close to 3,000. There were about 2,800 homes on the market in 2008.

 

Matt: Yeah. Now we're sitting around 650.

 

Pete: Yeah. If you see the inventory climb north of 1500, that would be good for some because home values come down, bad for others, for the existing homeowners, depending on how you want to look at it, but that would be over double the inventory. But where would this come from? Where would the homes come from? 

 

Matt: Maybe in the bigger cities.

 

Pete: Bigger cities. Yeah.

 

Matt: Yeah, bigger cities where people can't really...

 

Pete: Shasta County. I will tell you in Shasta County, we are the most affordable place.

 

Matt: In California.

 

Pete: In California, based on our average income and based on our average sales price. Our average income, I believe, is close to 70,000, sixty-something thousand, 68,000 and the average sales price is four-something, 410, maybe.

 

Matt: 410, 420.

 

Pete: Yeah. Right in there.

 

Matt: It was down to 380.

 

Pete: It's come back up. Cool. Well, Matt, I really appreciate you coming on. Any last advice that you would give to first time home buyers? 

 

Matt: As a first-time home buyer in this market, don't focus as much on getting the perfect home the very first time.

 

Pete: That's good. Yeah.

 

Matt: Find the home that you could work on and think of a two-year term and think you're going to own this for two to four years and then you're going to get a better home and a better price probably. And you're going to have the equity to buy that better home.

 

Pete: Turn it. Yeah.

 

Matt: So don't focus like this is your forever home; focus on letting's get you into the market.

 

Pete: Yeah, because it's a 30-year fix, many buyers think, "Oh, I'm going to have this for 30 years. Oh." And you know, yeah.

 

Matt: Yes. Yeah. And the average, I think the average right now, you could probably correct me if I'm wrong, but people don't own a home for more than four years, I think it is like, it's way high.

 

Pete: Yeah. It was like seven to 10 years was the average. I think it's down now. The average time someone has a mortgage is different than actually owning a house. Having a mortgage is right around that five-year mark. The average is.

 

Matt: That's what I was talking about.

 

Pete: Average, having actually the debt.

 

Matt: Yeah. Before they change.

 

Pete: Before they refinance or sell because obviously rates change, drop, you refinance out of that and get into a new mortgage. Yeah. So what you're saying is don't focus on having this home for 30 years.

 

Matt: Right. Focus on it for a period of time that you're comfortable with gaining equity, and make sure that when you buy that home, you take care of that home as a first time home buyer. And make sure that you do the upgrades and maintenance that it needs. As a first time home buyer, you're just going to be building your equity, and then it'll set you up for the next one. That's probably the number one thing I would say. The other thing is schools are huge for first time home buyers with kids.

 

Pete: Finding good schools.

 

Matt: Yeah. Young families are finding their first home.

 

Pete: Yeah. We have a lot of good schools here.

 

Matt: A lot of good schools. So there's a lot to choose from. Getting into a good neighborhood and a good school district is huge too.

 

Pete: I like that.

 

Matt: For the kids. Because I got three kids, and so, chanting stuff.

 

Pete: Chanting, yeah. Yeah, that's good. I like that. So, my last question, I call this the podcast Dream Big. And so, what does dream big mean to you and your family? 

 

Matt: Dream big to me. I mean, I've always dreamt. I think you probably know that. To me, nothing's ever been out of reach, nothing. And I can honestly say that.

 

Pete: Love that.

 

Matt: I think I could've done anything in my life. Where I'm at now, I love what I do. I love helping people. I have a passion for older people, and I would continue to do real estate. As long as it'll let us do this, I'll be doing it.

 

Pete: That's awesome. Well, thanks a lot, Matt. Appreciate it, man.

 

Matt: Absolutely. Thanks for having me.