Inventory “Surge” In Perspective; FHA’s Easy & Rates Are Low; Agents Work 85 Hours Per Transaction; Inflation Not Caused By Greed

Today’s blog is a random assortment of topics.

OMG! Inventory’s Exploding and the Market’s Gonna Crash! (Or Not)

Logan Mohtashami is a data-obsessed housing analyst who is all over Twitter/X looking for fights – and it is amusing.

One of his favorite fights though is with the “Crash Bros” (the name he gives people who’re always predicting a housing crash).

The Crash Bros love to illuminate the recent surges in inventory we’ve seen in some markets as indicators that we’re facing a repeat of 2008.

And – Logan just eats them alive.

Agents might share the below chart with any clients who are concerned about the “exploding inventory” that the Crash Bros are screaming about.

Yes, inventory is increasing on a % basis, but it is from all-time record low levels, and it is not even coming close to historical averages.

Keep in mind too that our population is much higher now as well.

FHA Loans Are Easy and Have Lower Rates Than Fannie Mae ($1.2 Million With 3.5% Down)

We’ve had several borrowers come to us in recent days who were misled by loan officers about FHA – and quoted ridiculously high rates.

One borrower was in contract and not yet closed, and another was already closed with a rate of 8.5% (we’re refinancing that borrower now).

In any case, this is just another reminder that: (1) FHA interest rates are much lower than Fannie Mae interest rates (see my rate quotes below, for example); and (2) FHA loans are no more difficult than any other loan – and they’re often easier.

FHA also has NO income limits. So, amazingly, someone can use FHA financing to buy an almost $1.2 million home with only 3.5% down – in a “High Cost” area.

Agents Work an Average of 85 Hours to Close a Single Transaction

I just watched a presentation by the CEO of a major real estate brokerage – that I cannot share because it is proprietary. But – the most fascinating part of the presentation was this: he commissioned a study to see how many hours an agent works to close a single transaction.

And the answer is a stunning 85 hours! He of course lists all of the tasks agents have to do, such as consultations, research, showings, negotiations, lining up financing, third-party (appraisers, lenders, inspectors, escrow) management, hand-holding/answering questions, writing contracts, reviewing inspection reports, post-close follow-ups, and much more. In any case, this data should prove very helpful to agents when they are explaining how they earn their commission (I will share it once I am allowed). And – it is a great reminder for all the people outside of the industry who think agents get “paid $30,000 just for filling out a contract.”

NOTE: He also explains how much less agents make than most people think, after brokerage splits, taxes, and expenses are subtracted from their checks.

And here is a great IG video by an agent explaining to sellers that they’ve never been obligated to pay commissions, but it is probably a good idea to do so.

Inflation Is Not Caused by Greed – & Why It Matters

I see the “inflation is caused by greed” fallacy repeated over and over on social media and in blogs (even in Leonard Steinberg’s excellent Compass blog), so I want to address it briefly. When markets are even remotely competitive, businesses can’t overcharge to be greedy because customers will simply move to competitors. The mortgage industry is a great example – along with almost every other retail sector. If Home Depot, for example, charges too much for chainsaws, lumber, and hammers, customers will start going to Lowe’s.

The exceptions are when the government protects a particular industry like utilities, or the telephone, trucking, and airline industries back in the 1970s. Additional exceptions are when businesses garner monopoly pricing power like Google might have, or like Standard Oil had over a century ago. Some luxury brands like Hermès and even Apple (Scott Galloway insists Apple is a luxury) can also command extra pricing power.

In any case, 99% of businesses can’t increase their margins because of competition, but they get blamed for being greedy whenever inflation sets in and they’re forced to raise prices. And yes, some companies, like the big oil companies, get away with higher margins for a while after inflation sets in, but it never lasts.

The reason this concept is so important is because ignorant politicians will blame retailers for inflation the politicians cause – and the politicians will then implement price controls – creating rampant shortages that hurt the poor the most. If you don’t believe me, just visit any city with rent controls – or ask any Venezuelan what happened when Venezuela implemented price controls. And sadly, I suspect we will see price controls implemented sometime over the next decade, as our government tries to inflate away our debt.

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