Episode 26: Pocket Change Podcast
If you're in the market for a new home this year, you need to tune into this episode of Pocket Change. David McLemore, president of the West Tennessee Home Builders Association, join Shea and Maddie to discuss the housing market in 2024 and why it's a buyer's market right now. The housing market is currently in a buyer's market, but that's expected to change as interest rates come down. If you're thinking about buying a home, it's a good time to act sooner rather than later.
"There is an opportunity right now, and that opportunity is... not to sound like a broken record, but act sooner than later." McLemore says.
Summary
The tide has turned from bidding wars and houses being snatched up within hours of listing, ushering in a buyer's market where negotiation is back and incentives abound. Interest rates, after a dizzying climb in 2023, are finally leveling out, making that dream home a little more affordable. This, however, is a temporary reprieve. As McLemore warns, "I do fear that that is going to go away as interest rates trickle down and drop into the high sixes."
So, what does this mean for you, the aspiring homeowner? It's time to ditch the sidelines and seize the moment. This buyer's market, though fleeting, offers a golden opportunity to secure your own haven at a price that won't leave you gasping for air. Take advantage of the wiggle room, negotiate for that perfect fence or sparkling new appliances. Remember, every little bit saved now translates to a lighter financial burden later.
Key Takeaways
- Interest rates may decrease in 2024, which will lead to more competition and higher prices.
- If you're able to buy now, you'll have a better chance of getting a good deal and buying the home you want.
- Act now and if interest rates come down, you can always refinance.
- Homeownership has a positive impact on the community. When you buy a home, you're not just investing in yourself, you're also investing in your community.
If you're ready to buy a house now but don't know where to start, reach out to one of our mortgage champions who will be happy to guide you through the home loan process.
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Full Transcript
Shea:
Hey, this is Shea.
Maddie:
And this is Maddie.
Shea:
Welcome to the Pocket Change podcast.
Maddie:
Where you'll learn better ways to spend, save, and invest and take control of your financial journey.
Shea:
So, Maddie, on the podcast today, we'll be talking about home buying. We actually did a first time home buying episode, Episode 8. So anybody listening, first time home buyers go back and listen to that one, but a lot more goes into homeownership and really home building. And, there's a lot to expect throughout our society and even our region here.
Maddie:
Yeah, and as we're going into a new year of 2024, I think a lot of our listeners are probably wondering, what's that home buying market look like for the next year, and how is that going to affect their financial decisions? So we're excited to welcome our guest, David McLemore, who is the president of West Tennessee Home Builders Association, to Pocket Change today. Welcome to Pocket Change, David.
David McLemore:
Thank you. I'm glad to be here.
Maddie:
Yeah, we're happy to have you. So, tell us just a little bit about yourself and then your background in real estate and home building.
David McLemore:
Well, I'm a native Memphian, and I got into real estate and home building around 1997, 1998. And, early on got involved with the West Tennessee Home Builders Association and have stayed involved during that period of time for quite some time. And as the involvement grew and I had more tenure in the industry, I eventually got on what we call the ladder, where you start out as the secretary and then you move to treasurer, vice president, and then president. 2023 was my year to be the president of the West Tennessee Home Builders Association.
Shea:
And then tell us more about what you do with home building and your business.
David McLemore:
I am a home builder. I got my contractor's license in 1998, and I've been building in the Memphis market since then. When I first got started, I built first time homebuyer houses, three bedroom, two bath houses. That market's been a little more difficult to build in the last several years because of cost and other things that go into it. But right now, I'm building what I call, or what we call move up houses, typically people's second home in a lot of cases, it's people's first home, but more than not, it's their second home. Most of them are four bedroom, three bath, two or three car garages, that kind of effect. But building those in the Memphis market, I'm also now building in the Jackson, Tennessee market. So we're building in Medina and also in the city limits of Jackson.
Shea:
Okay, so tell us a little bit about an update on the current housing market.
David McLemore:
Yeah, the current housing market right now, it's still strong, but it is more of a buyer's market than what we've experienced over the last five years probably. For the last five years, you did not have to incentivize the buyer very much. So you might have a small incentive. Maybe you might give away a refrigerator or a washer and dryer, but certainly not both. In today's world, especially over the last several months, the last year, with interest rates rising the way that they have, builder incentive has become more prevalent as the market conditions have changed. But, interest rates have started to trickle down a little bit. Recently we're seeing a little bit of an uptick in people getting out, looking at houses and buying houses. We personally have sold three homes over the last week that were all closed this year they're, all finished homes. We had four houses finished that we're setting and we've sold three of the four in the last week. So that's a good sign. And I think it's indicative of where we're headed in 2024 as rates start to trickle down. But it is a little bit more of a buyer's market right now.
Shea:
We sure hope rates will go down a little bit.
David McLemore:
Yeah, we do.
Maddie:
So you mentioned about the buyer's market, so how can maybe our listeners take advantage of that?
David McLemore:
They need to act. It's going to be a fairly short lived market, I believe, because across the nation, the National association of Home Builders, along with the National Association of Realtors state that we're short of the housing demand, anywhere between a million and a million and a half homes. Nationally, we're not building enough homes, new homes annually, to keep up with the new demand. Every year you have younger and younger people that are moving out of households, graduating, getting married and doing other things that, they want to get into the housing market. And over the last seven years, we've had a lot of them set on the sidelines for different reasons. A lot during COVID years, people moving either back in with parents after college because they couldn't find a job or other things. But as they're moving out or wanting to move out. They're wanting to become homeowners, and there's not enough supply out there to fill that need. So, when interest rates went from 2% to almost 8% over the last several years, it really slowed the market down because it was a shock to the system. No one was prepared for that type of interest rate change.
David McLemore:
And so it takes a minute sometimes for people to get their head around what that actually means to them. And what we've seen is more and more people having to adjust to that, having to adjust to a new price point, versus where they thought they were going to be buying because the interest rates are higher. But, now that interest rates are starting to come back down a little bit, I think we'll see change back. So we're in a little bit of a buyer's market right now, it's a great time to be a buyer. We own a real estate company as well. And I tell our agents, and I tell anybody that will listen, if you're in the market to buy a house, now's the time to do it. Because, where there is a little bit of wiggle room for negotiating, whether it's on the price or asking for a fence or washer dryer, refrigerator or something to that effect, that's going to go away. And we're going to go back to a market, because when the interest rates get back down in the sixes, certainly in the fives, we're going to see people start moving again, people start wanting to buy again, and there's not going to be enough supply.
David McLemore:
And when there's not enough supply and demand is much greater than supply, it's going to put a pressure on pricing because you're going to have two or three people chasing after every product that's out there. And that's going to push up pricing. It's going to do away with negotiating. It's going to do away with incentives. We're going to be back into a market like we saw after Covid. And this is not a good thing. This is not something I look forward to. But we're going to be back into a market where you're going to have multiple offers on houses that have just gone on the market. So houses are going to be selling 24, 48 hours. They're going to sell quickly, they're going to sell above asking price. You're going to be back where people are not doing home inspections, they're waiving inspections, and they're doing other things to make their offer more competitive. And that's not an all good thing. So if you're a buyer, then the sooner you can get your things together and go ahead and act now, that would be much better. You can buy a house now, take advantage if it's a new home, take advantage of incentives if it's an existing home, maybe negotiate a few percent off the asking price.
David McLemore:
But if you wait, then that opportunity is going to go away as demand picks back up in 2024.
Shea:
Certainly a lot to expect in this new year in 2024, and interest rates definitely affecting a lot of that. So hopefully we'll see those go down and, well, it may not be the best, but at least we can maybe get some more affordability for folks as they're looking for their home, for their family.
David McLemore:
Yeah, I definitely think you're going to see more affordability on the interest rate side as far as lowering the monthly payments, but you're going to see home prices start to escalate based on demand and supply.
Maddie:
That's true. So with the growth of Blue Oval City coming to West Tennessee, how do you see that impacting the housing market?
David McLemore:
You're going to have more demand, obviously. And there again, as that demand goes up and the supply is not keeping up with it, I think we're going to see a pressure on housing pricing, for several years in a row. Ford hasn't started hiring, to my knowledge. We've had a few people in the area, but not the thousands that they're going to need to open the plant. So if a lot of those people move into the area to get those jobs, they're going to need housing and they're going to find it somewhere. Immediately, I think they're going to find it either in the Memphis Metro market, the Arlington, the Lakeland area, the Oakland Tennessee area, or the Jackson Tennessee area because that's where the most housing supply is existing today. And so it's going to put a pressure on that market and it's going to drive up prices slightly and push that envelope. I think the announcement of Ford is fantastic for West Tennessee. I've lived in West Tennessee my whole life, and I look forward to everything that it's going to bring. But we are going to see, there are going to be some difficult things.
David McLemore:
You're going to have a little more traffic, you're going to have a little more housing, you're going to have a little more everything that goes along with growth, which ultimately will be good for everybody, especially the rural parts of West Tennessee. But it is going to put some upward pressure on housing pricing.
Shea:
So I guess I'm in my move up house. So we've got our second home as a family. But why is homeownership so important?
David McLemore:
That's a great question. When I first started building, I was building the first time home buyer houses. And the same thing happens in each segment of houses, whether it's the first time home buyer, the move up, or someone in their final houses. But if you go back to when you first bought a house, your first house, it was exciting. You bought the house. If it was a new house, you had to put blinds in it possibly. You possibly put up a fence because you were going to go get the new puppy. So then you've got a puppy to take to the veterinarian's office. You put the fence company in business because they built a fence. You're buying a new couch, a love seat, chairs, beds, bedding. The trickle down effect to the different industries is huge. Through purchasing of a house, I can tell you from experience, from building first time home buyer houses, you would just see it repeated over and over again. You'd have a couple come in, they'd put a contract down. They'd do their selections. They'd build the house. During that time they might get married. Then they'd move in. They'd build the fence, get the dog.
David McLemore:
60 days later, here comes a new car in the driveway. A year later, there's a baby. So it's a continuing effect that has a positive influence on the overall economy. And it's exciting to see as that family starts to build itself.
Maddie:
And I love hearing you say that as I'm in a phase of my life where I would like to buy a house in the near future, but I've never owned a home before. I'm still renting now. And so just hearing that, it has so many positive effects and also just putting down roots.
David McLemore:
Putting down roots and putting down roots in your community, getting involved, it just has a wonderful effect on a community.
Shea:
I just don't have a dog yet, but we got the kid, we've got our second home, we've got the fence. So it's ready if we do.
David McLemore:
There's a lot in shelters that need homes.
Maddie:
So thank you so much for all of the advice you've given so far. What would you say is your biggest piece of advice for homebuyers in 2024?
David McLemore:
Not to sound like a broken record, but act sooner than later. There is an opportunity right now, and that opportunity is... I'll give you a great example. When I first got in real estate in 1997 up into the early 2000s and just focusing on real estate and existing homes, not new homes. Someone would look in a house 2,3,4,5 times before they made a decision to buy the house. They might take two weeks to make that decision. They didn't want to be pressured. They didn't want to have to make a quick, rash decision. In 2020 people were literally having to make decisions in an hour and they were having to put offers on houses within hours of looking at it and having to make the decision of how much are you going to offer more than asking price so that you have a shot at buying this house. And we've got about 65 agents in our real estate company, to listen to the different stories of people coming in and saying, "my customer is just heartbroken. They put their twelfth offer in on a house and they didn't get it. Their 14th offer on a house and they didn't get it."
David McLemore:
To have that experience, to go through and try to help someone buy a house and have them make the decision, "I want to buy this house," and to miss it 12, 14 times is extremely difficult to watch. And right now we've got people looking at our new construction houses that have looked in them for two, three weeks. We're back to that market. That's healthy. There's nothing wrong with that. But I do fear that that is going to go away as interest rates trickle down and drop into the high sixes. And certainly when they drop into the high fives, the market is going to be wide open. You are going to be right back into that situation where you're having houses go on the market and they sell within 24 hours and they sell with multiple offers and they sell above asking price. So if someone has the capability, the means and the wherewithal right now to go ahead and find a house and put a contract on it and buy, the sooner in 2024 they can do that, the better they're going to be off for themselves. And if interest rates go down between 2024, the time they buy to the end of 2024, refinance, I know leaders has a lot of refinance options.
David McLemore:
Other mortgage companies, not to talk about them, but they have good refinance options. Everybody right now is focused on helping people make that decision to buy a house now and refinance later. The whole market is geared toward that right now.
Maddie:
Yeah, that's great advice. I think it'll be really helpful to our listeners. So we have one final question for you, and it's a fun one, if you had any extra pocket change, what would you do with it?
David McLemore:
Well, this is not going to be very surprising, but I would invest in real estate. If you look at the long road of real estate, it has positive appreciation. Who would not buy a house today? If I told you you could buy a house today for what you would have paid for in 2000, would you make that decision? Absolutely you would because you'd be buying it probably for hundreds of thousands of dollars less than what you would pay for it today. So if you have extra money now, invest it in real estate. If you already own a home, consider buying a rental home and utilizing that. So that's what I would do.
Shea:
Or if you have your pocket change, you might could just buy a socket cover or something. Or something to go into the house that you're renovating. But at least it's something that you're putting toward that and improving a home or a rental home or whatever.
David McLemore:
Yeah, absolutely.
Maddie:
For sure. Well, thank you so much for being on the podcast today, David. We really enjoyed having you.
David McLemore:
Well, I enjoyed being here. Thank you.
Shea:
Thank you.
