Jason Hartman welcomes two guests to the show, Bill Green and Daren Blomquist. Private lender Bill Green explains the financing and rates available for long-term and bridge loans. He also describes the differences between the options and shares. Later in the show, Jason interviews Daren Blomquist as they talk about real estate market updates. Daren describes the Housing Affordability Index tool and the Pre-mover Index tool and why income property investors should be wary of high appreciation markets.
This show is produced by the Hartman media company. For more information and links to all our great podcasts, visit Hartman media.com.
Welcome to the creating wealth show with Jason Hartman. You’re about to learn a new slant on investing some exciting techniques and fresh new approaches to the world’s most historically proven asset class that will enable you to create more wealth and freedom than you ever thought possible. Jason is a genuine self made multi millionaire who’s actually been there and done it. He’s a successful investor, lender, developer and entrepreneur who’s owned properties in 11 states had hundreds of tenants and been involved in thousands of real estate transactions. This program will help you follow in Jason’s footsteps on the road to your financial independence day. You really can do it on now. here’s your host, Jason Hartman with the company leet solution for real estate investors.
Jason Hartman 1:05
Welcome to the creating wealth show. This is your host Jason Hartman with episode number 846 846. Thank you so much for joining me today. Gosh, there’s so much going on in the marketplace. It is incredibly busy. inventory is scarce. You all probably have heard that mantra by now. But one of the great things that is happening out there is that, you know, I call capitalism The, the the most successful religion ever. It’s just such a wonderful thing because entrepreneurs come in and they fill the void in the marketplace, and they come up with unique products. And in the lending world, that is no exception. For for many, many years. There were really just two major choices on the spectrum of lending. There were the fantastic, highly desirable, coveted Fannie Mae and Freddie Mac or what’s known as agency loans. And you all know those are a great deal. But they make you jump through a lot of hoops they’re difficult to get. And just remember, though, when you have to jump through a lot of hoops, so do those renters who want to buy. So that makes the rental market stronger. Right? You’re there’s always a, a, an offsetting effect to everything in life. And then at the other end of the lending spectrum, there were hard money loans, very expensive loans 12 to 15%, maybe 2345, even 10 points. Yes, you did not hear me wrong. 10 points 10% of the loan amount. Occasionally paid up front on hard money loans really, really expensive. But in between there have been these lenders and we’ve profiled some on the show over the years that have come in to fill the void in that middle space that’s been vacant for so many years. These are the private lenders. Many of them get their money from hedge funds or private equity groups or Whatever. I’ve got one of those on with me today to help me with the intro. And it’s Mr. Bill green bill. Welcome. How are you?
Bill Green 3:07
Hi, Jason. Thanks for having me.
Jason Hartman 3:08
Good. Good. Hey, thanks for joining me for a few minutes here on the intro. I wanted to give our listeners before we dive into our main segment today, which is Darren Bloomquist, who’s back from Adam data. And realty Trac talking about forecasting and what’s coming up in the market, what’s going on in the market right now and so forth. We had him speak at our meet the Masters event last January in Irvine, California. And talking to you, you were filling your company, your new company, and you’re quite an entrepreneur in your own right, you had a big tax lien business that you sold and you had like $2 billion in asset value in that business. And you’ve done a bunch of things you’ve got a book out as well. But today I just want to talk really about financing in this middle space in the market in the intro portion of the show. So two types of financing that your your company offers that I think will be of interest to our listeners. One is the long term buy and hold financing 30 year fixed rate financing, and then you have some other options where people can get a maybe a seven year fixed or a five year fixed and then something that becomes adjustable after that. But then you’ve also got this other area that can really help our investors who want to buy a property as a, you know, say kind of quote unquote cash buyer. They’re not really a cash buyer, but they can buy with cash, essentially, by getting some easy, quick bridge financing from you buy the property with cash, and then refi out of that loan, that’s a more expensive loan into an agency loan, like a Fannie Mae Freddie Mac type loan within just a few months, you know, maybe a month or two months even. And so there’s sort of two types of financing. I wanted to have. You share some Rate information with our listeners today on deal. So which one would you like to start with?
Bill Green 5:04
Well, let’s start with Let’s start with the 30 year fixed rate. So our most one of our most popular products, and fantastic. Sure. And so if you’re a long term hold long term investor, you take the 30 year fixed rate product, which has a couple of great features. One is at the after three years, you’re able to refinance out pay off without any prepayment penalty, which is a very attractive and then if you want to finance this product at and take 75% of the value of the property and your 740 or above FICO score your rate 7.6%.
Jason Hartman 5:45
Okay, so hang on, so 25% down, that’s pretty attractive. So you get good leverage 75% LTV or loan to value ratio. And at a you said I think a 745 o score so you gotta have a good credit score there. And that Rate currently and rates are always subject to change, of course, would currently be 7.6%. Right? Correct. Okay, and if your FICO score is 720, you knock it down 20 points not quite as high, that route. Right? It’s a, it’s a, that would be 8% 8% rate on that one. Okay, good. So, you know, people might be listening though, and they might be thinking, well, heck, I can get out, you know, a traditional Fannie Mae, Freddie Mac loan, and I can get that now for I don’t know what exactly what they get for, but maybe 4.6%. Just for example, why would someone be excited about this type of program? So there’s a couple of reasons first, first, is once you get over 10, or 20, I don’t know what the guidelines are today. I think it’s, it was 10. They just moved it up to 20. So once you get over that, that amount of property, you can’t get an agency loan. And again, that depends he This is for each spouse, so if you’re married and both spouses can qualify, then you can double it right double that Fannie Mae, Freddie Mac limit. So, but once you’re past that, and we have lots of investors that are past that, you know, they don’t know what to do they either got to buy it with cash, straight cash get no leverage at all. Or the second best thing after the Fannie Mae, Freddie Mac, traditional loans are to go through a company like yours, you know, the property can still make a lot of sense even at these higher interest rates, right? Correct. So, we’re gonna, we’re not going to put you through hoops, we’re going to provide very high touch customer service and the best thing is you’re going to be able to close a rental loan with us in 15 days, unlike the agencies which could take months so when you’re out there shopping, you’re looking for properties speed is, is critical. So there we are, is your partner standing standing next to you at the tip at the closing table to provide you with you know, 70 up to 75% of the purchase price for that property. And the rates go down pretty significantly with lower leverage, of course, all our listeners who follow my 10 commandments of successful investing, you know, they want to get leverage, okay? They believe in leverage. I’ve, I’ve convinced them of that, that it is a great tool, very powerful tool has to be treated with respect, of course. But it’s a powerful tool to grow your wealth. And if you go with like, 40% down on and I know you don’t have these rates offhand, so I don’t want to put you on the spot because we could talk endless number of combinations here, right? our investment counselors can send you the link to Bill’s website, and you can go there and you can just get the quote yourself in a couple of minutes very quickly. Just you know, if you know your FICO score, you punch it in and you can play with some different scenarios, right in terms of different loan to value ratios, different amounts of downpayment, you know, different terms. If you don’t want to do 30 year fixed, you can get a lower rate initially, and get like a seven year fixed. Have some options there, right though?
Bill Green 9:01
Correct. And we offer a three year fix a three, one arm five, one arm and a seven one arm.
Jason Hartman 9:07
Fantastic. Okay, so that’s the buy and hold type of financing that’s available in this middle market with these private lenders. Okay. And, you know, we Americans have got to understand something. We are spoiled, spoiled, spoiled, because in the United States real estate has been subsidized by the government since the Great Depression. Okay through Fannie Mae, okay. And that is, you know, those rates are artificially low. So, you know, if you’re, if you don’t like paying a lot of tax, then you know, the way you’ll get some of your tax benefits back is to borrow money. You know, it’s a it’s a government subsidy. That’s what it is. It’s a it’s a welfare program for real estate investors. That’s basically what it is. So get all your Fannie Mae loans, all your Freddie Mac, Fannie Mae type agency loans, maximize those. Once you’ve done that, then you go to this second segment in the market not as attractive, but certainly a lot better than paying all cash.
Bill Green 10:11
Okay, now the second type of financing program your company offers, that’s pretty interesting is a bridge loan. So first of all, can you define bridge loan for the listeners real quickly? Sure, a bridge loan is very simple. It’s the bridge to taking a property whether it’s to acquire and then later get a different type of financing. But the most popular is the bridge loan to acquire a property, renovate it, and then sell it and all that is done. And typically less than one year, our average bridge loan is seven months and some even shorter. The good news is there. It’s interest only. So the only thing you have to carry is the interest payment. The there’s no prepayment penalty. So if you buy a property and you’re going to refinance it out on long term rates With an agency loan, it’s perfect because you know, it’s going to be less than 1% a month in virtually every case. And, you know, it’s extremely attractive, it’s quick, we can close a bridge loan in less than 10 days. And the other good news is that you can actually pre qualify so many of our bars come in and they get pre approved. So they can actually go out and go shopping and know with confidence, they’re going to go to that table, and they’re going to close with 75 and sometimes more of their purchase price of that property.
Jason Hartman 11:33
Okay, so we have one of our local market specialists, one of our affiliates through our network, who really doesn’t want to sell properties to buyers that do financing they want cash only buyers. This is where this could become attractive, where basically, you can essentially buy with a nice a quote unquote cash, okay, it’s sort of not really cash in the sense that it’s your cash, but the cash can come from Your company on a short term bridge loan, and then you you the plan is you refi out of that loan pretty quickly, hopefully in, you know, a month or two, maybe a little longer, who knows, you know, and you do want to get pre qualified for that refinance. So you have your ducks in the row. So you know, you get out of it. Now, nothing’s for sure disasters do happen from time to time where for some reason, you can’t close the refi. Okay, so that I just want to say that that is a a risk, okay, but it’s a relatively small risk as long as you truly get pre qualified. So what do the bridge loans look like? What are the rates? What are the terms? And again, you quoted these already for me, like any rates all is subject to change with the marketplace, but at a 720 FIFO score, and 25% down? What is that rate look like?
Bill Green 12:52
You’re just just short of 11%. So less than 1% a month,
Jason Hartman 12:57
okay, so less than 1% a month. Now. Again, this is an Expensive loan, this is what people are used to in the hard money market. I loan money like this all the time. Okay, and people pay me those types of rates. Again, we’ve talked a lot about hard money lending on the show over the years. One of the really hard parts is to keep your money in the game. Okay, so that’s a whole different discussion, but as a borrower on the borrower side of the table, you know, the idea is, you’re only going to have this loan for a very short time. Now, there’s no prepayment penalty at all, like Can someone borrow it and and literally pay it off in 30 days and not even pay 1% interest on it? Absolutely. Are there any points there?
Bill Green 13:38
There is a ranges between two and three points and the average turns out to be about 2.4%. Okay,
Jason Hartman 13:46
So if you do this and say your loan amount is $70,000, that’s the loan amount. You know, maybe you’re buying a property, well say 75,000 or so the property is $100,000. So You’re going to pay maybe two points. Okay? So that’s going to be 1500 dollars in points. And you’re going to pay in this example one month of interest. Okay, so another point. So you’re, you’re essentially for the privilege of buying the property with cash, that your fees are going to be about 20 $300 or so extra fees, right? Correct. Is that the right way to look at it? Correct. The only thing is the there’s a minimum of 20 $500 in fees in Okay, so a minimum 2500. And then there’s 595 legal fee and $100 processing fee. So okay. Yep. So three grand is what it’s gonna cost you for that privilege of having the opportunity to pay cash without using your own cash. Okay, good approx. So yeah, yeah. Again, we just wanted to expose you to some of these other options of we, we’ve done on other episodes over the years. Let’s get to our guests. Before we do that, of course, we’ve got our own Oklahoma City, jQ Jason Hartman University event and property tour coming up in early July go to Jason hartman.com. Click on events to register and get more information on that. And we will see you in Oklahoma City. That’ll be all day Saturday, all day Sunday meals are included with that event. I think it’ll just be a really nice time. So come out and meet us meet our clients. Meet our team in Oklahoma City for that Jason Hartman University live. And then of course, the property tour as well. And this weekend, just coming up in a couple of days, we got our venture Alliance event in Chicago. We just had two more people register for that yesterday. So that’s our venture Alliance mastermind. Check out venture Alliance mastermind calm for info on that one, probably too late for you to join us in Chicago. But our next event is slated for September. We have these quarterly weekend events and they are just phenomenal first class events. So that’s the venture Alliance mastermind and build Thank you so much for joining me today. If anyone wants to get in touch with Bill, get the link that we talked about to his website where he can go and get your own loan pricing. Just go to Jason hartman.com. Or if you’re already working with one of our investment counselors, talk to them, and they will connect you with Bill’s team. Thank you so much for joining us.
Let’s dive in and hear from Darren Bloomquist as we talk about what’s going on in the market today. And what to expect next. Here we go. Hey, it’s my pleasure to welcome back a returning guest and one of our speakers from our last January meet the masters of income property event held in Irvine, California. And that is Darren Bloomquist and he was the first person I had on the show after the Trump election. He’s with Adam data services and realty track and has some great predictions on where things are going. What’s going on in the market. Well, I shouldn’t say he has predictions. Maybe he has predictions. I don’t know yet. We’ll see. Ask him. But
Daren Blomquist 17:01
yeah, I have a couple of those up my sleeve but we predictions might be a little bit of a strong word. But crystal
Jason Hartman 17:08
crystal Borden was working right. Okay, forecasting Good, good stuff. Well, Darren, welcome back. It’s great to talk to you again. What do you see going on in the market? I mean, it’s a pretty heady, frothy time, it seems like what what are you seeing out there?
Daren Blomquist 17:23
Yeah, it just seems like every time you know, we think that the markets gonna level off and and, and cool off a little bit. We just see it gets stronger. And we did see that you talked about the election. In the first few months of the year, we did see one area where we did see cooling was refinancing and we looked at loan origination data. And there was a bit of a pullback or there Oh, there was actually a pretty, pretty dramatic pullback in the first quarter and refinance originations and there was actually a pullback in not as dramatic in purchase originations and sales. But I think that’s overshadowed by the fact that prices were up the home price appreciation accelerated in the first quarter. And so I think I would chalk that, that dip in home purchases, sales and purchase originations up to more of a lack of supply than a lack of demand. As home prices pushed up, just continue to accelerate and getting even close to back to double digit appreciation nationwide. We haven’t been there for a while. And in the first quarter of this year, so we we continue to see a market that’s I would say is on fire. But the Hallmark is this low, low inventory relative to the demand that’s there in the marketplace right now.
Jason Hartman 18:53
Yeah, fascinating stuff. So when we talk about the real estate market, I always think it’s important and you No, you know, probably know what I’m going to say is to segment in into three categories at least. And I know you do this geographically with every county in the US, but just three conceptual categories of linear markets, cyclical markets and hybrid markets. So linear markets being the ones that, you know, my company likes, those sort of stayed conservative kind of boring markets and the cyclical markets being the high flying California, South Florida and northeastern markets. Those types of things and the rest of the Pacific Northwest to certainly add include Seattle is a cyclical market, along with the other ones I mentioned. So do you have any thoughts during You know, when you look at the the country that way as to what’s going on I mean, our it feels to me like we’re really past the point of fundamentals in these high upscale markets that are just feel very bubbly to me, but it doesn’t seem like it’s that way and you know, middle of me Erica in these linear markets. Do you agree with that?
Daren Blomquist 20:04
Yeah, I do I with it with an interesting trend that I think, just as you were talking, kind of cemented in my mind, actually, that that we’re seeing is that some of these, and I, I, you probably have, this probably still fits within your theory, but I do think that we’re seeing some of the linear markets actually become almost more cyclical in nature, because this market is so hot. And I think this may also be an outgrowth of the fact that information and technology has come so far in the last even the last 10 years. And, and property data so those their markets, you know, the one that came to mind, and there’s a lot of other things going on there but is, you know, somewhere like Denver, I would, I would start putting that in a cyclical market where the cyclical category, maybe you could call it hybrid, but We have another name we call those hybrid
Jason Hartman 21:01
Daren Blomquist 21:04
So we’re Yeah, we’re seeing B, because these Well, first of all, I agree with the fact that a lot of those cyclical markets are way past the fundamentals. And we look at affordability as kind of a good benchmark, and many of them are past their normal affordability levels.
Jason Hartman 21:23
Okay, so tell tell us about that in when you were interviewing me for an article you’re doing. We talked about that. The housing affordability index, one of my favorite indexes, although it has its flaws, the probably the biggest one being that it doesn’t really account for immigration. So when you have a bunch of foreign money flowing into a market, like in Southern California, when you have all this Chinese money, for example, or New York City where you’ve got all this Russian money, right or and Ukrainian money flowing into those markets, or in Miami, you got all this South American money, right? So you know, those are just examples. So it doesn’t really account for that very well. But it’s My favorite index, if I only could pick one, it’d be the housing affordability index. I think that’s a good, you know forecaster of of what’s going on in the market. And you said something to me that was pretty interesting about the housing affordability index.
Daren Blomquist 22:13
Yeah, well, we’re what we saw, what we saw, what we saw in the first quarter was at 20. We looked at, we looked at 379 counties across the country. So it’s pretty widespread. 25% of those counties, which turns out to be 95 counties, were are now less affordable than their historic norms. And so we have an affordability index in our index of 100. is normal affordability for that market. 95%, or one in every four counties now is less affordable than that is below that 100 index. So that’s a lot of them are the places that you think of like the the Brooklyn’s of the world that the San Francisco areas, the coasts La,
Jason Hartman 23:01
la Orange County, where you live. Yeah.
Daren Blomquist 23:03
So that’s, that’s not so surprising. But then you start and we created a heat map of this. It’s it’s interactive, if you just Google or Adam affordability index, it should be the first for the first quarter, it should be the first thing that pops up. But in this heat map, you can see there’s these red means the county is below its affordability index. And you see this red starting to pop up in the middle of the country too. And some of these areas. So Denver is is a place I’ll pick on that’s past that I’ve mentioned already. Another one is a lot of markets in Texas. Yeah, are have gone past that affordability threshold. So I think that’s one thing that’s surprising to me in that whole conversation of linear versus cyclical markets. And I think it’s somewhat has to do with the technology advances that people now can easily buy a property across the country than they could 10 years ago. So there’s, there’s few, there’s fewer of these hidden. Yeah.
Jason Hartman 24:11
I think Darren, by the way, I just I want to just stop you there for a moment because that is such a good point. You know, we get people still but it but it’s super, it’s much less common when I was doing this back in 2004, I got a lot more people saying, well, gosh, should I only buy property near my home? And, oh, well, there’s two problems with that. Number one, you’ve got to live in the best investment market. And so if you don’t, then you’re gonna make a mistake. And number two, is that even if you do live in the best investment market, if you buy properties near your home, you’re not going to be diversified. And you know the old saying all real estate is local. So I just say take the most historically, proven asset class income property but diversified geographically in three to five Markets not at least three but not more than five. And so you’re diversified a little bit. Right? And that’s a good idea to, you know, just be a more conservative investor. But yeah, the technology has really enabled this revolution in real estate investing You know, it I I like to say and we haven’t talked about autonomous vehicles and their impact in real estate with with you, but I’ve certainly talked a lot about it on the show. In one of the things I always say Darren is, geography is less meaningful than it’s ever been in human history. It’s, it’s still meaningful, don’t get me wrong, I mean, location, location, location, definitely still matters, but less so than ever. Okay, I would argue geography is less meaningful than it’s ever been in human history. And technology has just, it’s just amazing time to be alive, you know, stuff it is. Yeah.
Daren Blomquist 25:50
And and yes, there’s a lot of technology. You know, the word technology is about the broadest term I could probably pick but you know, specifically talking about The the availability of data out there for investors to research other locations other than their own and then we we license our data to a lot of folks who are helping investors make decisions about you know about a certain market that may be thousands of miles away from where they’re located. So that that type of technology is, is has really been booming in this in this real estate boom.
Jason Hartman 26:27
Yeah, no question about it. You know, you can, you can go online, you can find it, you can look at the Street View of a property, you can look at the satellite images. You can use Zillow for better or worse, it’s not perfect by any means. to research things. You can use your website to research things. Then when it comes to maintenance, you can source people and parts and products so easily, and you can price check things when, you know the repairman says Well, hey, that garbage disposals gonna cost this much. You go to Home depot.com or Lowe’s dot com and you can Miranda’s On and so you know it should only cost this much here. So it’s really incredible that the kind of checks and balances if you will that we have nowadays so that some some phenomenal tools you know, of course, FaceTime video Skype video, you know just the availability of such rich media instantaneously is is really incredible you know, young people Gen Y does not realize the way it used to be.
Daren Blomquist 27:28
Yes, young and
Jason Hartman 27:31
you’re you’re close to being one of those young uns yourself probably.
Daren Blomquist 27:34
I’m definitely and firmly in
Jason Hartman 27:38
line with you. I’m a Gen X or two. Thankfully not quite a baby boomer. Well, okay, good. So tell us about you know, any of the other stuff you’re seeing. So, housing affordability for a moment, though maybe a little more on that. So 25% of the markets in the country are less affordable than they have been historically. Right.
Daren Blomquist 28:00
Yeah, it’s it’s kind of a mouthful to say. And maybe it’s a little bit hard to understand. But yeah, that’s exactly right. We we compare each market to itself, we don’t compare it to other markets because which we think is more fair because you know, Kansas City or Wichita where I grew up in, which is one of those linear markets is going to always be more affordable than San Francisco. But so instead of comparing it to San Francisco, which we do, but the index is really comparing, which to itself, not to San Francisco, which we think is a more fair measure, but even by that more fair measure, 25% of the markets are less affordable than than they have been historically.
Jason Hartman 28:43
So okay, so we know that 25% are less affordable than they historically have been. But How bad is it there and like in some of these markets, are they just insanely unaffordable?
Daren Blomquist 28:55
And I would say they’re absurdly affordable in because if Look at the actual percentage of income if you just instead of doing the more of the nuanced index, which we do if you just look at the raw number, the percentage of wage needed to buy a medium priced home and some of these markets, it’s, it’s over 100%. So basically if you are making the average wages in that market, you there’s no way you can buy afford to buy a home. And that’s places like the top of the heap there is Kings County, New York, which is Brooklyn. If you’re making the average wages, you’d have to spend 121% of your your monthly wages, which is more than you have to buy in Santa Cruz, California, Marin County, California, Manhattan. Maui actually is in there, Napa County. California is in there. So yes, places like that. It’s just insanely are absurdly affordable if you are an average Blue Collar
Jason Hartman 30:01
wage earner. So that means Something’s got to give either people have to lower their expectations, their wages have to go up or prices have to come down or interest rate you know people always buy on a payment not really the price almost doesn’t matter that much, but the payment is what matters. So the interest rates have to come down now there’s not much room for that. Certainly. Yeah, it’s um, or you know, people are just left out. And that’s it. You know, they just don’t buy and they just are renters. What, tell us about you have this other in this new indicator that you’re using. Tell us about that one. What’s it called?
Daren Blomquist 30:37
Yeah, and actually what you just said is a great segue into that because kind of one of those other options implicit in what you just said is, you know, if a market becomes too affordable, you move
Jason Hartman 30:47
to unaffordable and affordable
Daren Blomquist 30:49
to an afford if it becomes unaffordable for you. One option is you move and one and so this new index we have it’s called the pre mover index, which is Instead of looking at completed sales data, we’re looking at loan estimates that have been sent to borrowers. And it’s connected to a specific house. So we’re able to tell where the houses are the people are applying for loans to buy. And what we found is that’s pretty highly predictive that they’re actually going to buy there eventually, in the next 90 days, there’s a 75% chance that home will actually sell once their loan estimate has been given on the property.
Jason Hartman 31:30
Okay, wait a sec. So this is the pre buyer index, pre mover remover index, and what does it do? How do you know, how do you use this index? How do you get the data? I know
Daren Blomquist 31:41
I went through that pretty quickly. It’s not our typical public record data that we’ve used for most of our other reports, this is taken from basically a loan estimate. So when the MSE is goes back to the Dodd Frank law, but when you apply for a loan to buy a specific property. You the lender has to provide you with a loan estimate telling you everything it’s up to, you know, all the loan costs and closing costs within three days. And so this loan estimate is data we’ve been able to get our hands on, and in a lot of markets, and what we tested it against our public record data. And what we found is if a property has a loan estimate, sent out on it, within 90 days, there’s a that property sells 76% of the time,
Jason Hartman 32:33
but do you How can you How can you get the loan estimates for every lender out? I mean, that’s just amazing that you can add data.
Daren Blomquist 32:41
Yeah, that is a great question. And a good a good qualification is it’s not for every single lender. Wait, but we’re getting this through service providers who I can’t name because it’s a little bit sensitive.
Daren Blomquist 32:56
And we probably probably
Jason Hartman 32:57
for just the big lenders, I assume
Daren Blomquist 33:00
We estimate, it’s Yeah, it’s not the full market. It’s actually probably around 15% of the market, which isn’t big, but it’s enough. It’s enough to show the trend smash to show the trend. And it’s it’s widespread geographically. So yeah, it’s, it was very interesting to me to dig into this data because there’s, there’s actually an additional piece of this data is it breaks down
Daren Blomquist 33:25
Daren Blomquist 33:27
loan estimate is broken down by
Daren Blomquist 33:31
by type of purchase. So you have your primary or in your investment properties, right? Yeah, yeah, we have it broken down by primary home, second home, and then investment homes. And anyway, that’s another piece of it. I could talk about it, but just the first piece is where people are moving. And one of the things that the big takeaways for me is that the markets with the highest index are, tend to be more of those linear markets or hybrid markets. They’re still affordable. But a lot of times still have access to jobs and other amenities. But even then, if you dig down into a specific metro area like Southern California here or Seattle, that the counties within those markets that have the highest pre mover index, where the most people are moving, is, uh, is the outline County. So in Seattle, it’s it’s Pierce County, which is Tacoma, which is more affordable here in Southern California. It’s, it’s kind of the same thing we saw 10 years ago. It’s a place like Riverside and San Bernardino County, the outlying areas, get it. And they you said to me, the great old saying drive until you qualify. That’s, that’s an old saying in real estate, and that’s what people are doing because they’ve been priced out of the sort of the primary area that would probably be their favorite. I mean, in your area where I used to live for many years, you know, people would rather live in Irvine than Corona. Right are Riverside or San Bernardino. So they’re driving until they qualify, right? Yep. Yeah. But yeah. So in your example, if Corona is the only place that they can afford, and they have to drive a little farther to get to their job, that’s, that’s the type of place we’re starting to see. pop up is where people are moving. And just to give you a couple examples of of the markets just nationwide, that are seeing the highest index, the prime mover index, top of the heap was Colorado Springs, Colorado, Charleston, North Carolina, Raleigh, North Carolina, Tampa, Lexington, Kentucky, Jacksonville, Florida. Orlando does a lot of linear, I would say linear.
Jason Hartman 35:42
So that’s predictive of where most buyers are going. That’s interesting. Yeah. Yeah. In some of those markets, though, See, the problem is, here’s the problem there. And, you know, that doesn’t necessarily mean investors should run over there because that’s, that’s a you No more of an appreciation play, it doesn’t mean the rest of the fundamentals of cash flow. Makes sense. But it is interesting for sure. I’ve always thought, I just wish I could really, and I’ve tried to do this, and I’ve interviewed companies that pretend to do it, but nobody’s quite there yet. Now, Google might be able to do this, but they’re not really sharing the data. But if you could look at like search traffic, right, you know, properties for sale in Memphis, you know, that means and that was the biggest search term. That’s a predictor that people are looking at properties there. You know, that’s like a good sign. Right. And so your pre mover index is is pretty interesting. Yeah, that’s, that’s a good one.
Daren Blomquist 36:42
No, but it shows demand, I think, yeah, you have to take it in context with other factors for sure. Now, interesting, you mentioned Memphis because if we look at that other part of this data that I mentioned earlier, broken down just not by the pre mover index, but by the percentage of People who are are getting loan estimates who are investors, or who say they’re buying the property for investment purposes, Memphis is the top of the heap there. And we’re showing 30% of the, of these loan estimates. We’re, we’re to in Memphis were two buyers who identified themselves as investors. The second highest market was Indianapolis, and then third was Cleveland. And fourth was Durham, North Carolina. And fifth was Dayton Ohio.
Jason Hartman 37:33
No, no. And Durham’s just a little too expensive. So for for the most of the investment thing, but yeah, I like it. That’s good. Okay, good. Good stuff. So what else are you seeing out there? Is there kind of one more tidbit you can share before you go of anything that might be useful to investors and listeners?
Daren Blomquist 37:51
Yeah. Wow. So there’s a lot of stuff.
Jason Hartman 37:54
I know this question.
Daren Blomquist 37:58
We do a quarterly report on It is, we look at a very basic look at basically cap potential cap rates or gross rental yield. That’s when you can look at we are in our newsroom that you can look at that we released back in March. And, and all the linear markets that you talked about really are top of the heap there. Home flipping, that’s we did our report on that just two weeks ago. And we are seeing and, you know, home flipping is still very, very doing very well. It hit a 10 year high home flipping did in in 2016. And we start kind of level off in the first quarter, but still very strong home flipping activity. And one of the things that stood out was that we are seeing gradually, slowly but surely more financing for flippers, and I think you’ve alluded to this as well, and that you’re seeing more and more competition out there in the world of financing too. For flippers, but we’re seeing an eight year high and the percentage of home flips that were financed in the first quarter, as opposed to where the flipper bought with cash.
Jason Hartman 39:12
So what does that like? Let’s try and figure out what that means. Right? So the home flipping activity means certainly it’s a vibrant market. And there’s a lot of investors out there trying to buy up, what’s whatever inventory, they can get their hands on, rehab it and resell it at a higher price. But that inventory is getting gobbled up right away. So the thing that’s incentivizing these people to do it is that they know they can sell the property fast. Okay. And there’s a huge waiting demand out there for for properties. So, yeah, it’s pretty interesting. So when home flipping activity goes down a lot, I’d say that’s a bad sign, wouldn’t you?
Daren Blomquist 39:53
Yeah, that means the kind of the front lines of the real estate market are seeing signs of trouble and so they’re back And that’s, I mean, if you look at our home flipping, we have a storica graph. It just fell off a cliff and right about it started falling off a cliff as early as mid 2007. And then it really plummeted to a bottom and it hit bottom about 2000, late 2009, early 2010.
Jason Hartman 40:21
The interesting thing is though the contrarians who didn’t back them made a bundle of money. Right?
Daren Blomquist 40:27
Yeah, absolutely. It’s a flip home flipping does have a lot of, kind of, I don’t know what to call it, baggage around work, your bandwagon flippers who who jump on the bandwagon and quickly jump off the bandwagon. But they do tend to be the folks who, who say, hey, look, if we’re starting to see early signs that this market is softening, we’re going to jump off and stop the flipping activity. We’re definitely not seeing that it because of that the lack of of inventory that you mentioned it does. It’s a double edged sword. It makes it harder to find deals on the front end but certainly if you can find a deal on the back end there’s plenty of buyers to sell these properties to yeah
Jason Hartman 41:14
no question about it. Interesting stuff give out your website Darren tell people where they can find out more
Daren Blomquist 41:19
yeah all of our the news that I’ve been talking about the reports are on we still run the realty track comm website even though our corporate brand is Adam data solutions. So that’s a TT o
Jason Hartman 41:29
m, by the way, right?
Daren Blomquist 41:31
Yep. The TTS think of the two T’s is a PI symbol. Okay, and and yeah, but anyway, those reports are all on stone. realty Trac comm forward slash news. It’s a great source and it’s all free content there. And then we we do have a subscription service to help you to go in and research properties and then we also have a marketing list creation tool, marketing lists, realty Trac comm where you can can go in and actually select based on your criteria of type of homes and type of homeowner. Create a marketing list to market to to source properties
Jason Hartman 42:12
now. Fantastic Darren Bloomquist. Thanks for joining us again, and we look forward to talking with you in the in the future.
Daren Blomquist 42:18
Yes, thank you so much for having me, Jason.
Jason Hartman 42:22
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