0:00) So, what do an FBI raid, a software algorithm, and your prospective buyer's current rent payment (0:06) all have in common? Well, it's a big real estate antitrust case. And good news is, (0:11) it has nothing to do with your commissions for a change. (0:22) Well, hello out there to all you passionate podcast patrons.

Welcome to Texas Real Estate (0:26) Finance podcast market update for the week of June 11th. My name is Mike Mills and I'm your (0:31) local luminary shedding light on the biggest stories in real estate that you just don't have (0:35) time to read about because you are too busy helping your clients buy and sell real estate. (0:40) So, I'm here to update you each week on the news impacting your business so you can keep grinding (0:45) it out in this real estate game that we all know and love to play.

And just in case you didn't know, (0:49) when I'm not dumping my brain into this microphone twice a week, I'm here to help your buyers and (0:53) find ways to finance that diamond in the rough property that they've had their eye on for so (0:58) long. My team and I specialize in those out-of-the-box situations that most lenders shy (1:02) away from. We love helping people that have heard no way too many times and helping them find a way (1:06) to get that home of their dreams.

So, if you got somebody that just can't seem to get help anywhere (1:10) else, give us a call and let us see what we can do. Okay, enough about me. What do we have in store (1:14) for today's episode? Well, right off the top, we've got your weekly mortgage interest rate update.

(1:18) Where are they now? Where are they headed? And more importantly, why? Then I'll let you know (1:22) with housing inventory across the country and right here in Texas. As we head into the summer, (1:27) inventory is actually beginning to climb. Unfortunately, just like the heat index.

(1:31) But I'll tell you where you can find the best opportunity for those good deals for your clients. (1:35) I also have some news stories from around the world of real estate and finance that (1:38) impact your business that you should be aware of. Government spending is up, (1:42) unemployment is flat, but is it really? And what big events are happening this week (1:46) that are likely to move markets? And finally, I'm going to tell you what an FBI raid, (1:50) a software algorithm, and your client's rent payments all have in common and why it's just (1:55) one more reason for your clients to find every way possible to get out of the rent race.

(2:00) So if you know someone on the fence about buying right now, you need to hear this story. All right, (2:03) let's buckle up and tune in because we're about to take a fantastic tour around the market. So (2:07) Mike, you say, what are the rates? Well, I'm glad you asked.

So according to mortgage news daily, (2:12) as of June 10th, the average 30 year fixed conventional mortgage rate is about 7.17%. (2:18) The average 30 year FHA rate is about 6.65%. The average 30 year VA rate is about 6.66%. (2:25) That's a little scary number. The average 15 year conventional rate is about 6.62. (2:30) And the average jumbo rate is about 7.38%. So overall rates are basically flat to slightly (2:35) down from this time last week. And overall last week, we saw some pretty dramatic volatility in (2:40) the bond market due to higher than expected job openings reported by the BLS on Friday, (2:44) because things had been trending pretty solidly in a good direction as far as lower rates are (2:48) concerned, only to be flipped upside down on Friday by some BS BLS data more on that later (2:54) in the episode.

But either way, we're starting to trend back into higher rate territory as we (2:58) head into this week. And Wednesday is going to be another huge day for mortgage rates as the (3:01) market braces for CPI inflation data for May and the feds June meeting. The general sentiment is (3:06) that inflation will remain mostly flat, but how the fed response to that data and what they say (3:11) at the meeting is what's going to ultimately determine where rates turn this week.

The (3:15) overall expectation is the fed is not going to change rates, but they may give indications as (3:20) to what they plan to do for the rest of the year. So stay tuned because this could be a big week (3:25) for mortgage rates. And guys, like I've said on many times on the show before job data is going (3:29) to be so crucial to where rates go for the rest of this year.

Inflation data is certainly going (3:33) to play a role and it will move markets up and down some, but the overall expectation is that (3:37) inflation is going to remain pretty sticky for the foreseeable future. And if the fed does decide (3:42) to start cutting rates, at least in my opinion, it'll have less to do with inflation and more to (3:46) do with the job market and unemployment. And right now, since we're in an election year, (3:50) every single headline and every bit of information coming out about the economy (3:54) should be subject to scrutiny because if headlines say that jobs are plentiful and (3:57) the economy is booming, that's good for the incumbent.

But if headlines say that jobs are (4:01) slipping and the economy is contracting, then that's good for the party that's not in power. (4:05) And with all the revisions to the data that have come out months after the initial headlines, (4:09) with of course, much less news coverage, it's very understandable that analysts are going to (4:13) look at these reported numbers a little more closely to see what they're actually telling us (4:18) about the health of the U S economy, regardless of what the corporate media tells you. Because (4:21) right now, most of the headlines say that the economy is awesome.

However, many Americans are (4:26) not experiencing that. And here's the deal when it comes to the 2024 election and what voters say (4:31) they mostly care about. It has nothing to do with all the social and cultural issues that you hear (4:36) about all the time through the corporate media.

And I don't need to say what they are. You guys (4:40) all know it. The real main issue in the upcoming election is the same main issue that it's been (4:44) for every election, the economy.

In fact, a recent poll of 3000 homeowners and renters were asked, (4:50) what were the important issues that would decide their vote in the presidential election in the (4:54) fall? And 91% of Gen Z voters said affordable housing was their top issue compared to 87% (5:01) of millennials, 83% of Gen X and 80% of baby boomers. But people vote with their wallets and (5:07) housing affordability is the most important issue in this year's election, surpassing everything else (5:12) that you can think of. This is on everyone's mind.

And you guys are at the front lines of this. (5:16) That's why it's so important for you to stay up to date on where things are trending. So you can (5:20) alert your clients when things start to shift.

It's one of the best reasons to stay in front of (5:25) and contact your past clients right now. And I'm here to make sure that you're up to date. So make (5:30) an appointment every Tuesday to tune in and find out where things are headed because I got your (5:33) back.

All right, moving on. So when it comes to housing affordability, the biggest story related (5:37) to this for 2024 has been the rise in inventory. Now, if you're on Twitter or YouTube regularly, (5:42) you'd think we were on the verge of a major housing crash because of all the inventory gains (5:46) that we've made in 2024.

Because according to them, housing is crashing, prices are falling (5:51) and sell before it's too late. I love this stuff probably more than I should, but I find it (5:55) entertaining at the very least. So here's the thing.

Inventory is rising all across the country. (6:00) And if you're in real estate, this is a really good thing. Not a bad thing.

Inventory growth (6:04) means that there's more options for buyers, which means better opportunity for deals, (6:09) which means more people being less angry about the prices of homes and willing to start shopping. (6:14) You can get seller concessions, price reductions, or rate buy downs. If that's your jam, (6:18) it just means that there's more options for buyers, but be aware that this isn't everywhere.

(6:22) There are plenty of markets where inventory is still very, very tight. And there are some markets (6:27) where we are finally above pre-pandemic inventory levels, which just means we're starting to crawl (6:32) out of the inventory hole. It doesn't mean that we're even close to being back to even just a (6:35) balanced housing market because a balanced housing market is where we have anywhere between (6:39) five to seven months of inventory on hand to purchase.

So in Dallas Fort Worth right now, (6:44) for example, we have about 37,000 homes for sale, which based on the rate of sales equates to about (6:49) three and a half months of supply. And our low was back in January of 2022 when we only had about (6:54) 19,000 homes on the market. And back in July of 2019, we had about 40,000 homes available for (6:59) sale.

So we are just now starting to get back above pre-pandemic levels. And again, this doesn't (7:04) mean that things are crashing. It just means that we're starting to get a little healthy again.

(7:07) But if you compare it to a place like Chicago, where right now there's only 11,000 homes for (7:12) sale and things are still very tight, if you're living in Illinois, it's still really hard to get (7:16) home. So it all depends on where you are and what you're looking for in the U S as a whole (7:20) inventory rose from about 605,000 units last week to about 611,000 units this week. And last year, (7:26) at this time, we were only sitting at about 443,000 total units available.

So we're making (7:31) big improvements. Absolutely. But again, the last time we had even somewhat of a healthy balanced (7:36) housing market was back in 2015 when we had 1.16 million units on the market.

And Oh, by the way, (7:43) between 2015 and today, the U S population has grown by more than 20 million people. (7:48) So we're at half a million less housing units with 20 million more people still incredibly (7:52) unhealthy, but improving. So inventory growth is good, but it doesn't mean that housing is (7:57) crashing.

It's like being starved and weighing like 50 pounds. And then when you finally have (8:01) some food to eat and get up to maybe like a hundred pounds, people start telling you that you need to (8:05) go on the biggest loser before things get out of control. Trust me, we can still afford to gorge (8:09) ourselves on housing inventory before anyone needs to start worrying about crashing.

So there (8:14) are deals to be had out there, but only if you're looking in the right places, but there are also (8:18) plenty of places out there right now where realtors hear the term highest and best. Anytime (8:23) they make an offer like good luck buying in ULIS, Capelle, Allen, grapevine, peril, and the colony (8:28) in Louisville in North Texas. These are some of the most competitive markets in the state right (8:32) now.

But when you get into some of the bigger metro areas around Texas, we're growing in inventory, (8:37) Houston, San Antonio, Dallas proper, Austin, Fort worth, and Arlington as of May, 2024, (8:43) have the most available inventory that they've seen in over four years. So is this trend going (8:47) to continue? And should your clients wait to see if prices come down even more? Well, honestly, (8:52) maybe, but like anything else, when the market flips, it's going to happen very fast and it (8:57) will be driven by rates. And when that August 17th deadline hits and sellers are going to be less (9:02) and less inclined to pay buyer agent commissions.

If rates do trend down the deals that you can find (9:07) probably aren't going to be there. So time will tell, but encourage your clients to look and see (9:11) what's out there because the perfect home could be coming their way. And there could be a great (9:15) deal attached to it, even if they aren't quite ready, but if there is a deal to be had, this (9:19) is the best time to be looking for it since the pandemic, depending on where you look.

And as (9:23) always, I will be here to let you know when that market does start to turn. So stay tuned. All (9:27) right, now let's touch on a few headlines around the economy that could impact your buyers and (9:32) sellers.

And you should be aware so you can know exactly what's going on and how it might affect (9:36) someone's decision to buy or sell their home. Just some quick hits to keep you in the loop and a few (9:40) upcoming events that you're going to want to pay attention to. So last week it was reported that (9:44) the US economy added 272,000 jobs coming in much stronger than the market anticipated of about (9:50) 185,000 jobs, but unemployment rose from 3.9% to 4% and markets moved very heavily in a bad (9:57) direction on this news.

Why you ask? Because it shows that the economy is still strong and would (10:03) lead people to believe it would push a Fed rate cut out even further into the future. But how could (10:08) we add jobs and have the unemployment rate go up? Well, here's why some of these numbers still look (10:12) a little suspicious. So almost all of the jobs, 231,000 to be exact, came from what's called the (10:18) birth death model, which only estimates the number of jobs added by small businesses using a formulaic (10:25) calculation and not actual job numbers.

However, when you look at the household survey, which (10:30) actually polls Americans to ask them about their job situation, there was an estimated (10:36) 408,000 job losses. And that's where your unemployment number comes from, which is why (10:41) it went up. But of that 408,000 people, 250,000 people said that they left the job market (10:47) altogether.

And so those numbers are completely factored out of the unemployment rate because (10:52) those people aren't technically looking for a job. So what that means is that the unemployment (10:55) rate could have been even higher if that 250,000 people didn't just give up on the job market (11:00) altogether. And oh, by the way, you can for sure expect some revisions to that job gain number in (11:05) the coming months.

But all that matters right now is that that headline said we're doing awesome. (11:09) So based on all that, what do you think? Now, in some local Texas news, TXSE Group, (11:14) backed by BlackRock and Citadel Securities, plans to launch the Texas Stock Exchange in (11:19) Dallas, going up against established New York-centric exchanges in a bid to attract (11:24) global companies. Right now, the exchange has raised about $120 million and plans to file (11:29) registration documents with the U.S. Securities and Exchange Commission to start operating as (11:34) a national securities exchange later this year.

The Texas Stock Exchange aims to attract listings (11:39) of exchange-traded products and challenge increasing compliance costs at major U.S. (11:44) indexes, as well as newer rules including setting targets for broad diversity at the NASDAQ, (11:50) according to a report in the Wall Street Journal on Tuesday. The TXSE will ultimately create more (11:55) competition around quote activity, liquidity, and transparency, resulting in more consistent (12:00) and reliable markets, a spokesperson said. And if you're a Texas realtor, this is actually (12:04) really big news for you.

It just means that more and more businesses will be looking to (12:08) the Lone Star State as a possible location to put down roots, which means more jobs and therefore (12:13) more people. Big things are coming to Texas and it's never been a better time to be in real estate (12:18) than right now. Or at least in the near future.

Maybe not right now. Now, the U.S. government is (12:23) spending as if we're in some sort of a global emergency right now. So, U.S. government (12:26) expenditures as a percentage of GDP hit 43%, matching levels not seen since the 2008 financial (12:32) crisis.

To put it in perspective a little bit, spending as a percentage of GDP right now is just (12:38) 1% below World War II levels. Even at the peak of World War I, U.S. government spending as a (12:46) percentage of GDP was 20% points lower than what it is right now. You see, propping up the economy (12:50) with government spending is just one way to maintain growth during an election cycle.

But (12:55) when and how are we going to pay this debt? No one knows or even seems to see this as a big issue, (13:00) which it should be the number one thing you hear coming out of politicians' mouths on both sides, (13:05) especially if they care about the health of our country. But right now it's nothing but crickets (13:08) from either side of the aisle. So, you want to know another reason that interest rates could (13:12) come down? It's this.

Because with nearly $35 trillion in debt right now at 5% rates, (13:18) which is what the Fed charges the federal government to borrow that money, we're going (13:21) to pay $1.5 trillion in just interest debt in 2025, which is almost 30% of all the government (13:28) revenue that will be collected next year. This is absolutely not sustainable and is going to be one (13:33) of the biggest threats to the overall U.S. economy that you're going to hear more and more about in (13:37) coming years. Also right now, the gap between native-born and foreign-born employment has (13:42) never been wider.

U.S. native-born employment has not seen any growth since 2020. But at the same (13:47) time, the foreign-born workforce has seen a 14% growth. Immigrant employment jumped from 27.1 (13:53) million in January of 2020 to almost 31 million in May of 2024.

Meanwhile, the full-time job count (14:00) fell by 625,000 jobs, while part-time employment jumped 286,000 in May. Right now, labor market (14:08) dynamics are shifting to part-time employment and cheaper and cheaper labor from foreign-born (14:12) workers. The only wage growth that's happening right now is at the lowest levels of the economy (14:17) and also at the highest levels, meaning the poorest and richest are seeing the most growth.

(14:22) But remember, it's all relative. Meanwhile, everyone in between is experiencing higher and (14:27) because more demand from more people and also stagnant wages. And they wonder why half of the (14:33) American public think that we're currently in a recession.

This is just one more reason why (14:37) we are sitting in a housing affordability crisis because the middle class is slowly slipping away. (14:43) But in tech news, Apple and OpenAI, creators of ChatGPT, just announced a new partnership (14:48) that will include ChatGPT being integrated to many Apple devices coming down the pipe. (14:53) Apple Intelligence, as they're calling it, will be available on iPhone 15 Pro and Macs plus iPads (15:00) with the M1 operating software and later.

So why should you care about this? Well, (15:04) if AI isn't already a big part of how you run your real estate business, then it better start to be (15:08) because there is absolutely no tool on the planet that's going to have a bigger impact on you (15:13) personally over the next 10 years than AI. And it's integration into everything that we do is (15:19) already here and it's moving at an exponential rate. So you better get very familiar with it if (15:24) you already aren't because it isn't coming.

It's here. And if you're not up to speed, (15:28) you're already late to the game. All right.

Now for our final story of the day. So what do an FBI (15:33) raid, a software algorithm, and your prospective buyer's current rent payment all have in common? (15:38) Well, it's a big real estate antitrust case. And good news is it has nothing to do with your (15:44) commissions for a change, but it does involve what I like to call the Skynet of real estate.

(15:48) And this little company called RealPage. Now, if you've been following this show for the last year, (15:52) you would be very familiar with these scumbags. Now, I want to give a shout out to one of my (15:56) favorite online news sources, which is called Breaking Points.

And their correspondent, (16:00) Matt Stoller, for putting this wonderful story on my radar. Breaking Points is a wonderfully (16:04) balanced news show that you can find on YouTube. And I highly recommend you check it out.

It's (16:09) something I watch almost every day. So on June 4th, they ran a story from Matt Stoller about an (16:13) FBI raid of a big corporate landlord over algorithmic price fixing. So Cortland Management, (16:18) an Atlanta-based firm that rents out 85,000 units across the U.S., had their headquarters raided by (16:24) the FBI last week.

Now, this particular raid was part of a much bigger conspiracy orchestrated by (16:29) software and consulting firm RealPage to increase rents nationwide by coordinating landlord pricing (16:35) decisions and holding empty apartments off the market in order to shrink available supply. (16:41) So right now, 81% of apartments located in Atlanta are owned by Cortland. And for the (16:46) last several years, have had their rental rates set via this RealPage software.

And as a result (16:50) of this, rents in the Atlanta metro area have grown by 80% since 2016. Yes, 80%. So you see, (16:58) how this happens is that RealPage goes into a market like Atlanta, and they contract with all (17:03) of the landlords in the area and share all of the pricing and inventory data available.

And based on (17:07) that data, generate rent amounts that all of these units should be set at. And what this does (17:11) is it allows for all of the landlords in a market dominated by this RealPage algorithm to offer the (17:17) same or similar rent based on the size and location of the apartment or home. So then, (17:21) when the time comes to raise the rents, the landlords can raise it by the same percentage (17:26) across the board.

So as a tenant, if you're looking for a cheaper place to live, you don't (17:30) have any options because the rent is the same. And the real kicker of this is, is that they would (17:34) tell apartments and multi-unit properties to keep certain units off the market so they weren't (17:40) available in the active supply. And they would do this to help drive the overall rents of the (17:44) units available up.

So overall, in the aggregate, they would make more money for the landlords. (17:49) And by the way, this is happening to some degree in markets all over the country right now. Heck, (17:53) even here locally, the Fort Worth Star-Telegram reported last week that 26% of the homes in Fort (17:57) Worth were owned by large corporations.

And if you think these companies aren't using similar (18:02) softwares to set these rent prices, you need to think again. Now, the good news at least is it (18:06) looks like they're cracking down on this as demonstrated by this most recent FBI raid. (18:10) But what it doesn't mean is that this problem is going away.

If anything, they're just going to (18:14) get smarter about how they do this and avoid the scrutiny of the law. Because that's what happens (18:18) with everything, especially when it comes to big money. But the bigger takeaway from this, (18:22) especially as real estate professionals, is that this is what happens when you rent.

(18:26) You have zero control in the cost of your housing. And whether it be a landlord, (18:29) a big corporation, or a computer algorithm, someone or something else is determining what (18:35) you have to pay to live. And even though right now the cost to own your home and the rates to obtain (18:40) financing are at the most unaffordable levels in history, how is it possible to see this story and (18:46) not understand that renting as a long-term solution is not affordable or sustainable either? (18:52) Look, mortgage rates are going to fluctuate every single year.

Sometimes they're up, (18:55) sometimes they're down. And home prices are going to continue to climb no matter what (18:59) rate environment. And it's true, right now it is cheaper to rent than it is to buy.

But having (19:03) absolutely no control over your housing costs and leaving it into the hands of someone else (19:08) is not the answer either. You see, this algorithmic pricing trend is like how Netflix and Amazon (19:13) know what you're shopping for and what you like. They're all using the same data.

So they're going (19:18) to know how much money you make and based on your zip code, what you'd be willing to spend. (19:22) And then they use the algorithm to set those prices accordingly. Heck, even Wendy's, (19:26) the burger chain tried to float the idea of how to price their food based on this.

(19:29) They were going to use algorithmic pricing to adjust the pricing based on the time of day, (19:33) the market, and what part of their menu that people liked the most. And when they did this, (19:37) people lost their minds and they canceled, at least for now. But this kind of algorithmic pricing (19:42) is coming no matter what we do.

And it's just a matter of time before it starts to take over (19:46) everything, including your rent. So if you need another reason to help your buyers understand (19:50) the importance of owning a home and not renting forever, well, here you go. This is the real (19:54) antitrust case that actually matters, not the one related to your commissions.

So share this (19:59) with your network. Let them know about all the things that are conspiring against them to take (20:02) home ownership away and urge them to fight back by not letting this stuff happen. And the number (20:06) one way to do this is to control your own housing expense before someone else does.

And to start (20:12) taking those first steps to becoming a homeowner, whether that's education, talking to a lender, (20:16) or starting to shop for homes. Information is the key to alleviate the fear of buying. And your job (20:22) is to arm them with this information so they know what the future might look like if they stay a (20:26) renter.

Because like I've always said, the best time to buy was yesterday, but the second best (20:31) time to buy right now. Well, my friends, that is all for today. Hopefully you walked away with a (20:36) little bit of ammunition to get your buyers and sellers in the right head space about today's (20:40) market and the opportunities that are available.

My intent is to bring you information to help you (20:45) do more business and show more people the path to that American dream that we all strive for. (20:50) So until next time, be great humans, keep grinding. Life is what you make, (20:55) so make it great.

Have a great rest of your week.