Episode Transcript
[00:00:00] Speaker A: Welcome to AllView360 all things real Estate Podcast. With your hosts Daniel Gutierrez and Shannon Dempsey, we explore real estate from every angle, giving you insights, tools and confidence to make smart decisions that support your future. It's time for a new perspective on Property. Welcome to AllView360.
Hi, Daniel.
[00:00:20] Speaker B: Hey, Shannon. How are you?
[00:00:21] Speaker A: I'm so good. I'm excited about today. It's going to be more of a conversation, one that we.
What month are we in? February.
[00:00:28] Speaker B: End of February.
[00:00:29] Speaker A: End of February. You and I have not really sat down and had a full debrief on what 2025 looked like, so I'm excited to do that today. Just in general, all of the things that we saw in 2025, it's been
[00:00:42] Speaker B: a crazy start to the year. We've had a debrief in regards to how business went, but not a debrief in regards to how the general market was, what we saw and what that means going forward. So, yeah, I think it's important to look back in how the past was, how 2025 was, so we can understand what went well, what didn't, what our thoughts were, what our anticipations were, what our strategy was, how we did relative to the rest of the market course correct as needed, double down on what worked, pivot on what didn't, and ultimately just be the best we can for ourselves, for our clients and for our company.
[00:01:15] Speaker A: Yeah. And to have this strategy mapped out and planned for when ultimately in a similar market five, ten years from now, because it's going to happen and not reinvent the wheel every time.
[00:01:25] Speaker B: Yeah. For instance, the stock brokers or hedge fund managers, they all do that. They have softwares that allow them to stress test and test their thesis in relation to how it does in specific markets. And they're, you know, super expensive platforms will actually run simulations and how it does or would do in markets across cross, you know, across countries, across different indices and different times. So I don't think there's anything like that for our industry. But the fact that you're remembering that is huge and will help you in the future. We'll help your clients in the future.
[00:01:59] Speaker A: Yes. And I had, I went to a seminar towards the end of 2025 and all of the numbers were presented of what 2025 has looked like and what 2020 or 2019 had looked like. And it was kind of a turning point for me with how I was approaching the market, because I'm thinking this is the toughest, worst year of real estate ever. Realistically, the stats for 2019 and the stats for 2025 were very, very similar.
Just completely different mindset and approach to the market in general. So I think knowing those stats, paying attention to them, kind of putting logic behind a lot of the, I mean, real estate's emotional, right? So putting logic behind the emotion, we can guess and wonder and go on what we feel like, what's happening. But what was realistically happening was no different than 2019 in a lot of the different categories.
So that was kind of a turning point there. But what would you say the biggest impact, what was causing the biggest impact on the 2025 market from your perspective?
[00:02:58] Speaker B: Well, I think to your point is people's expectations and expectations are everything. We came out of 2021, which is crazy. 22, which is still fairly crazy.
And people anticipating that that was going to keep going, having conversational clients thinking that their to appreciate 10, 15% year over year, that their rents were going to appreciate 20% year over year, and having them realize that that wasn't true, that, you know, the talk in their neighborhood, the, the, that one TV show they watched was not actually true, and then presenting them with the data and sometimes those presenting them with multiple data points, multiple data sources, for them to even be open to the idea that their preconceived notions of this just hockey stick of increases in value and rents, everything else was unrealistic, unrealistic.
[00:03:48] Speaker A: And I, I mean, it's natural, right? As a seller, you saw what your home was worth on Zillow or wherever you look, or maybe you talk to a professional, you learned your home was worth x amount in 2022, 2023, that's not the case anymore. And having that, I think 2025, we were seeing a lot of balance, the market balancing out from the results of those super low interest rates, the high buyer demand, people paying, you know, 50, 100, $200,000 above the market value.
That's what was happening. And those became the numbers. And then as the rate increased, the property value started to balance. That's what I kept explaining that we are balancing out. We're not, they're not coming, they're coming down in value, but they're going back to what the true market value was.
And I feel like a lot of 2025 was those conversations that your home is not worth what you thought it was worth and locked onto that number and then stopped paying attention to kind of what was happening.
[00:04:43] Speaker B: There's that component, then there's also the component too, where even if it is worth what we're asking. There's not the buyers out there that perhaps are willing to pay it right now. But to my previous point, I think the only hockey stick that I really saw in the market was expenses. Expenses for repairs, expenses for maintenance, expenses for upgrades. That was a hockey stick, but not a hockey stick that people, I think, wanted to see.
[00:05:08] Speaker A: No. And then in general, inventory I think was a huge factor too. We were at a 30 year low in 2024 and 2025. And I don't know, are you expecting inventory to pick up in 2026? Are you seeing it pick up?
[00:05:22] Speaker B: I'm seeing it pick up a little bit. I don't expect it to.
But I think one of the biggest factors of that is what mortgage rates do. And if mortgage rates lower, people are able to move. I think inventory will increase. But as long as interest rates stay high, and we talked about this previously, but now interest rates, at least in front of them, if they're staying high, people aren't moving, inventory is not going to increase.
Home builders aren't really building, especially in Southern California right now. So that's not going to change. The rest of the country is a little bit different. But Southern California, I don't see inventory ticking up as much as I think we'd like to see. But also there's inventory that also just sits and sits and sits and that is, I think, scaring off a lot of buyers from even listing.
[00:06:06] Speaker A: 100%. Yeah, I have wonderful sellers from listing. Yeah, Sellers from listing. But just kind of, even if you were saying it's impacting buyers, homes are sitting for a longer period of time. Days on market is very high. It's starting to actually go down and homes are starting to move again, which is very relieving to see. But there's homes that were on the market 90 days, 100 days that had absolutely nothing wrong with them. They were great homes.
Some of them were in escrow and out of escrow. Buyers got cold feet. And just seeing that high days on market count was new for a lot of buyers and new for sellers. And you immediately correlate that with something must be wrong with the home. And it wasn't the case. And in some cases, you know, the next assumption is that it's overpriced.
They weren't overpriced. They just. We just didn't have buyers.
[00:06:55] Speaker B: Yeah. And I think a hundred days on market wasn't even the extreme cases you'd see. You know, 180 days on market, 200 days on market. And at that Point it's, hey, take it off market and there's no buyers, even if they weren't overpriced. And correlation to that as well is this isn't just on the real estate sales. The days on market for rentals and also commercial properties skyrocketed. Commercial properties, I think got hit hardest. Most sectors, office, retail, industrial, those all got really, you know, hit hard. But on the residential side, days on market was well over 30 days to rent a home vacancy ticked up to 7.6% across California. Some cities were worse than others, and rents were actually down. So while real estate values on the transaction for the sales side stayed pretty flat on the rental side, it actually dropped. And that was a hard pill for a lot of owners to swallow.
[00:07:54] Speaker A: Yeah. Why do you think rents did get so high and then started to go down, and how does it correlate to the residential sales and all of that?
[00:08:03] Speaker B: Well, there's a lot of factors there. I think affordability is one. You know, rents are super, super high, especially in the areas that we live and we work. So now you're, you know, someone $150,000, your salary is renting a home for 4,500. And then once you take in consideration there are other expenses, taxes and everything else, over a third of their income is going to rent. That's kind of crazy. So, but at the flip side, like to buy that same home, that 40, $500 a month home is probably close to 1.5 million, at least in Orange County.
So that mortgage is going to be astronomically higher. I think affordability is just a major, major issue.
People aren't finding affordable places to live. But there was a study that came out from rents.com and it talked about how people are actually much less worried about finding their new homes because they do see so many homes on market that they're no longer jumping at new listings. They're taking their time, they're negotiating because they know they have so much more leverage than they really have over the last 10, 15 years.
[00:09:04] Speaker A: Yeah, I think 2025 was the first true buyer's market and tenant market that I've ever experienced in my entire time in doing real estate. It's been a very long time since we've had a true buyer's market. The speed of which buyers were moving was killing me. I'm a fast person in general. I like, you know, so real estate has taught me that, you know, patience and time and all of that. But I just was shocked at the amount of time spent deciding if you wanted to make an offer on the home. I just was not used to that.
[00:09:34] Speaker B: No urgency.
[00:09:35] Speaker A: Yeah, no, it was just no urgency.
And they didn't really need to be urgent. You know, you could take three weeks to hum and ha and look at numbers and go back to the home three or four times and they had that luxury, I guess. Yeah. But I will say in the, the end of 2025, Q4, 2025 and the start of this year, I, I am seeing buyers be a little bit more urgent. I haven't figured out statistically exactly why, but are you seeing that, are you seeing that with other aspects of real estate too?
[00:10:07] Speaker B: So I've seen a lot of urgency on multifamily deals recently.
But in general, I've seen homes that are really well priced to provide a lot of value.
Those are still moving quickly.
Homes are overpriced and you still have the clients who say, hey, let's just list it high and see how it goes. Historically, every time we've done that over the last two years, they sit longer and sell for less.
[00:10:29] Speaker A: Sit longer and sell for less. And this is not the market for that.
[00:10:33] Speaker B: No, you sit, you price it well, it gets aggressive interest, you get multiple offers and you do well.
So that's a really hard conversation. We're having a lot of clients and even on the rental side, that's a conversation that we're having with new clients before we commit to working with each other and saying, hey, like this is what we recommend. Do you agree with this? And if they don't, then we're not going to waste our time spending hundreds of thousands of dollars marketing a home, preparing a home for rent just for us to try to achieve some unreasonable number.
[00:11:05] Speaker A: I think what I had to do a deep dive on with that approach of let's list it this number because I really want this number. And so people are going to come in low and I want to give myself room to negotiate. That usually doesn't work. And the way, and I think it depends on the price point, honestly the mindset of the buyer that's going to be buying that, that home. So we're talking specifically with the average home sales price a little above average.
Most buyers and most buyers, agents, and I've had this conversation a lot, they don't think to go in and look at homes that are above what they want to pay, thinking they can negotiate below that. They set their, their searches, they do their mind set on I'm approved up to a million dollars. I'm going to look at everything a Million and under. And there are a handful of listings out there that are at 121 1. That will take a million all day. And it's just like, I have one client. I had to explain. I understand that that's how you buy homes and that's what you do. You go in and negotiate good deals and this and that. That's not the average negotiation mindset. Would you disagree with that or.
[00:12:08] Speaker B: Well, it's difficult there. And I don't know whether I would agree or disagree. But then like, for instance, when we're on the sales side and we do have a home listed at 1.2 million, and you have the buyer coming in, doing showing, spending a ton of your time to submit a purchase, offer a million or 995,000, you're like, why did you just waste my time? This is insulting.
So I see it both ways.
And at that point, you never know whether you're going to find the right seller who just needs to sell or who you're going to find the wrong. The time you're going to find the wrong seller and just really piss people off.
[00:12:41] Speaker A: I mean, I'm not opposed to pissing people off, but, you know, and I, And I had deals come together that way, where they are priced too high, or I shouldn't say price too high, priced above the market value, with the strategy that someone's going to come in and lowball me based on my asking price, and then I'm going to negotiate a number that I'm actually happy with. That has worked a little bit. It's not my favorite approach, but it has worked. And then I have other ones. It's not working at all. We're just sitting there, sitting there, sitting there, and it's not fun.
[00:13:11] Speaker B: Well, you can only control half of the equation, right? You and your client. And even then, you can't control the client. But who comes to you, whether you're on the buy side or sell side, you can't control the other side. So you, you work the best you can to get your client what they want and what they deserve. And oftentimes, or as kind of attorneys always say, you know, the best deal is when everyone leaves just a little pissed off.
[00:13:34] Speaker A: Did you say that to me yesterday or did someone else say that to me?
[00:13:37] Speaker B: No, I didn't talk to you yesterday.
[00:13:38] Speaker A: Oh, no, we just texted another. Another agent said that, look, if everyone's pissed off, that means this is probably a good deal, you know, and everyone's pissed off. And I'm just. Well, like, I don't know what to do. But that is a good point. Like everyone, you know, either they're both getting somewhat of a win or they're viewing it as they're both taking a loss. You know, it's very, very true, though,
[00:13:57] Speaker B: and hindsight's 5050 too, because you also saw the people who wanted to buy in, you know, 2019, 2020, and they thought it was too expensive. Now they're sitting here in 2026, and they're completely priced out of any neighborhood that they could have afforded back then or could even afford now.
[00:14:13] Speaker A: Yeah, I was talking to an agent yesterday. She's wonderful. And she was kind of sharing her theory on what we're going to see specifically with kind of the Millennial group and the, the people that purchased in 2020, 2021 with that low interest rate. And I guess the fear that, that you. That we're gonna not see movement in those properties because they're not gonna wanna give up their rate. And she said she's starting to have a lot of those people call her. You know, we're, we're willing to give up our 2%, 3% rate to move into a house that we want. And she's like, I remember buying with all of them. And everyone got into the mindset of, I just need to get a home. I just need to get a home.
Homes that weren't necessarily checking all of their boxes, and now that there's a little bit of equity or, you know, they've had another child or whatever it might be, they're willing to give up those rates to get a home that they actually want. And I never really thought about how many people are in homes that they don't necessarily want, but got caught up in the, the excitement of the low rate and the competition.
[00:15:15] Speaker B: And it's want to need. Because you mentioned one thing, too, is like, they have a child, they now they're making more money. They have a different neighborhood. So all of those factors now create that push for them to make that change and, you know, give up that interest rate. But another factor, too, that we were discussing prior is you don't have the baby boomer selling because they don't have to sell. They don't want to sell. They're going to, you know, sell and go into a much smaller home at a higher price.
So that, I think is also going to add stagnation into the market until that changes. And I think it'll be a while before that changes. As we were discussing, if California does change, the irs, specifically for California for the capital gains exclusions for married or single, that would be huge. And a lot of baby boomers would be more willing to sell because they're not going to get hit as hard on those capital gains taxes.
[00:16:12] Speaker A: No. And I didn't realize. So that got thrown out. The idea of adjusting that, you know, has kind of been floating around in 2025. I know that it's sitting in a couple different bills. I know that there's a lot of, no matter where you land on the political spectrum, there's a lot of different sides pushing for this to increase. I didn't realize that it has not changed since 1997. That's crazy. So, so in 1997, $250,000 and $500,000, which were the exclusions in equity, that made sense. Right now it doesn't. It's, it's a dent in what people are netting in their properties that they've owned for a very long time.
[00:16:50] Speaker B: Well, especially in our markets, it's no longer the, the rich that are having to worry about the million dollar exclusion. Now it's the average family who's owned their home for, you know, 20, 30 years, they have a million in equity. No problem in these markets.
[00:17:03] Speaker A: No problem. So the, I think the proposed numbers, from what I can gather, just from the different ways that it's coming down the pipeline is 500,000 for an individual and a million for a couple. And I do think that that will generate some movement.
[00:17:18] Speaker B: Yeah, absolutely.
[00:17:19] Speaker A: It's going to help out a good amount of people. So hopefully that happens. I think this rate, because is it still that 5.8% is the tipping point for affordability with the interest rate.
[00:17:30] Speaker B: I think depending on who you talk to, where you look, that's going to, that's going to vary.
[00:17:35] Speaker A: It's going to vary. I do think somewhere in the fives is what's going to be more palatable for people. And we were at 5, 9, 9, I think this morning and this week, and we're at the end of February right now. This week has been a crazy amount of calls and all across the board. I'm thinking of listing my house. I'm thinking of buying again, whatever it might be. So there is a correlation between that five being in front of the interest rate and not. And honestly, five, anything in the fives is not a bad interest rate. Just feels that way.
[00:18:03] Speaker B: It's all relative, too. And I get frustrated when you have agents talking about, you know, when they're in the teens during, like Reagan or something like that. But at the end of the day, like it was a different world back then. The values.
Yeah, exactly. Yeah. So that, that's frustrating because they're only discussing one part of the equation.
But at the end of the day, a 5% interest rate on a, you know, million plus dollar home, still super high. That's a lot of the money going to interest.
[00:18:32] Speaker A: A lot of the money going to interest.
What about. So nationwide the, the luxury, ultra luxury market is considered 10 million plus. That market in 2025, the 10 million plus sales increased 32% which is significant.
[00:18:46] Speaker B: Yeah.
[00:18:47] Speaker A: Why do you think that happened?
[00:18:49] Speaker B: So all the data indicates. Well, a few things. The ultra wealthy and ultra rich oftentimes don't have to take out loans to buy homes. So they're less susceptible or less price elastic and less caring about interest rates.
Also too, when you're buying those kinds of homes, you don't get the interest rate that most people do. Just applying on Rocket Mortgage. You generally have relationships with banks. They're going to lend you on their portfolio, so they lend you off their balance sheet and they don't sell that loan to Fannie Mae or Freddie Mac. So I have friends who are getting, you know, still 3% loans from what would be JP Morgan and from other private banks because they have relationships with that bank and they have so much money that the bank is willing to loan them at a much lower rate because of the deposits they keep on at their bank.
So that's, that's one factor.
[00:19:44] Speaker A: They're not dealing with the standard mortgage
[00:19:46] Speaker B: interest rates, they're not dealing with standard mortgage interest rates or even sometimes mortgage rates at all. But oftentimes to those high net worth people, ultra high net worth people see this as an opportunity to buy assets at a lower price than they otherwise would have, especially relative to 2021, 2022. So they're jumping in the market, seeing an opportunity and buying real estate where they feel there's more of a value because there's less competition and more opportunity.
[00:20:14] Speaker A: They're not competing with financed buyers.
[00:20:16] Speaker B: Correct. And for instance, where we are in Newport beach right now, or at least where I am in Newport BEACH Right now, 10 million is a fairly normal transaction price, which is kind of crazy, but you still see a lot of
[00:20:28] Speaker A: things moving, a lot of things moving. And then the other positive increase graph that caught my eye and I called you right after is San Diego specifically. And I'm sure that this correlates to all other, you know, major cities, San Diego overall, the zip codes with the true San Diego address saw a decline in overall transactions in real estate. North County, San Diego, which tends to be a little bit more affordable or you're getting larger homes, you know, for the same price of a smaller home. In San Diego, they all saw a significant increase in transactions.
So there wasn't much movement overall for the county, but less in San Diego City, more in North County San Diego. And that was, I mean, that makes sense when you really break it down that people started moving to areas that they could get more bang for their
[00:21:17] Speaker B: buck, they could actually afford. Sometimes it's not even bang for their buck, but just straight afford, just completely
[00:21:22] Speaker A: priced out of certain areas.
[00:21:24] Speaker B: You do have, you had, you have a lot more new development in north county than you do in San Diego proper.
So there's also more opportunities because there's land to build there. People or developers are building and you know, people are buying. And there's been also to a of developers that have found creative ways to help new buyers purchase because otherwise their new developments will sit on the market. Even you and I discussing the new FHA limits across Southern California have just, you know, skyrocketed over the last few years.
[00:21:54] Speaker A: Yeah, they go, they're above the, the FHA and VA limits are above the median home price number, which is good for those buyers. It allows for them to, you know, have more options and then kind of increases more competition. The other big thing, like right now,
[00:22:11] Speaker B: real quick, FHA in LA is 1.25 million. FHA in Orange county is 1.25 million. San Diego county is 1.1 million.
We were laughing when you helped me buy my Huntington Place over 10 years ago now, the FHA limits was like
[00:22:29] Speaker A: 500,000 and that for it to double in 10 years, that was pretty crazy.
[00:22:34] Speaker B: Yeah.
[00:22:34] Speaker A: And probably needed to happen.
[00:22:36] Speaker B: Yeah. But even then, like there's a pretty interesting kind of numbers here. For two units, if you're buying a duplex in Orange county, your FHA limit is 1.6 million. Three units, your FHA limit is 1.93 million. And for four units, your FHA limit is 2.4 million. You could buy a four plex, take an FHA loan out 2.4 million, rent out the other three units, live in one of them, maybe have roommates, your costs are covered. That would be, that would be an awesome opportunity for the most part.
[00:23:08] Speaker A: Yeah. People need to take advantage of it though.
[00:23:10] Speaker B: Yeah.
[00:23:10] Speaker A: What about the 50 year mortgage? How do you feel about that?
[00:23:12] Speaker B: I think it's fairly ridiculous. I think with the amortization table of real estate or A mortgage loan, the shirts, I think the monthly expenses are going to be lower, but the majority of your payments are going to go to interest for a very long time.
[00:23:28] Speaker A: Yeah. You're renting from the bank, essentially.
[00:23:30] Speaker B: Yeah. Most people stay in their homes. Was it five to seven years? So when you sell five to seven years later, you're not only, yeah, sure, you're going to have a lower payment proportionately.
So much more of your payments are going to be going towards interest as opposed to principal.
[00:23:47] Speaker A: So your loan balance is not going down.
[00:23:50] Speaker B: Not going down, Absolutely. So sure. If you want to do that and that's your way to get into your home, great. But don't fool yourself. It's not affordability, it's just a, it's more financial engineering to make it appear more affordable. I think that's something that the administration is doing to try to help alleviate the affordability issues without actually tackling the root cause of the issue. If you want to do that, I mean, make it easier to build and develop. I, I was talking to you, I've been talking to you about it for a long time. But it took me 17 months to get permits in Costa Mesa to do a ground up development and that's not uncommon. Newport beach, you're talking two years. Laguna beach, you're talking three years.
[00:24:31] Speaker A: It's ins, Coastal Commission, Mission beach, it took them three years of being diligent. They were on it. They were pushing for three years to get their permit approved for a tear down rebuild. And it took so long, honestly, they didn't have the bandwidth to do it anymore. By the time they got approved and we were able to sell those plans, those approved plans for a decent amount of money. So they didn't waste all that time. But it was a true three years. And everyone in that area knows that's how long it takes to even get through that process. It's not easy.
[00:24:59] Speaker B: It's not easy, no. And then you start talking about the tragedy from the Palisades fires and Altadena. I mean, it's going to be a very, very long time before they're rebuilding. But it's just the state in general, it's super, super difficult to build.
And that's really one of the issues. You were asking me about tariffs earlier. Sure. Like tariffs did increase the cost for construction, increase late or increased material costs and people, I think were generally able to price that in. But then you double that with what's going on with immigration. You can't find laborers to build, your wages are going up. So now your materials are going up, your labor is going up. And now you could no longer build homes and sell them at a affordable price where people are actually going to be able to buy them.
So you're talking, you know, five years to build a, you know, normal development track, home development.
Your material costs are going up, your labor is going up, and you know, you go to sell it and it's no longer even reasonable. And the builders know that. So they're stopping projects and saying, hey, I'll wait till this is a different market. So I know I'm not going to be screwed at the end of the day.
[00:26:11] Speaker A: No, it was definitely overall a decline in new construction in 2025. Slight, but still a decline. And I'm curious to see how 2026 plays out in that new construction world.
[00:26:23] Speaker B: And even on the multifamily for larger projects, the government's now mandating affordable housing. So if you want to build a large multifamily project, the government's going to require you for a certain portion, depending on where you're at, of your development to be affordable housing, workforce housing. So now you're going to need to deliver units at a much, much lower and like a fraction of the rent lower to meet those laws and still be able to make the project pencil. And the majority of the time it doesn't. And even then, multifamily had a bit of an overbuild because while there is a shortage of housing in general, there's a shortage specifically on the single family home side or affordable side. So it's not really addressing the problems going on. And you see, you know, you see those new developments coming on board. But even like downtown San Diego, Irvine, the vacancy rates are super high. Absorption is just not there. And you build 1,000 units and charging, you know, $4,000 a month for a two bedroom, that's not helping anybody.
[00:27:22] Speaker A: No, it's definitely not. What about contingent buyers? Like, I don't. Are you experiencing that on both ends?
[00:27:31] Speaker B: Not as much. We have, we're having more of those conversations, but it's still risky. And once you have those sellers who are, you know, 100, 180 days on market, they're willing to take those contingent because there's no one else there.
[00:27:43] Speaker A: I know. And it's riskier than ever because the, the buyer backing out a deal, that, that's a high number. Right now I think we were up to like 16% of transactions were falling through, which is crazy. I think we Normally hover around 3 to 6%. So it's riskier than ever. But you're right, the sellers that have had their home on the market for a long time, they're kind of willing to risk that I have. I need to take notes and figure out exactly where I'm at with a bunch of contingent people right now. But they're all on thin ice and it's the reality of what we're doing. I'm very transparent leading up to it. You know, this is the risk we're taking on both ends as the buyer. Here's what happens if they decide this, you know, and, and it is risky and all of that's coming to fruition right now and we gotta figure it out. But this final quarter of 2025, the amount of contingent buyers and the openness to accepting contingent buyers for me personally was significantly higher. So I'm assuming that's kind of how it is across the board and it's what's needing to happen.
[00:28:38] Speaker B: Yes, but then you also have to the risk of those, the request for repairs really killing the deal because those repairs are now, you know, so much more expensive than they ever were. And I think that's putting people at odds during the transaction.
[00:28:55] Speaker A: Yeah. And people are putting most of their money down to avoid financing as much as possible. And they don't have the funds to make these huge repairs or these costly repairs afterwards. I have one more stat that I want to talk about. Average first time home buying age. Do you know what it is now?
[00:29:09] Speaker B: Gosh, like 37, 40.
[00:29:12] Speaker A: Okay, that's crazy. The first time home buyer number is
[00:29:15] Speaker B: 40 I millennials are the majority of the buyers right now from what I remember reading. But like you look at Gen Z and they're for the most part like they're not even thinking about buying beyond not being able to afford it, similar to not getting driver's licenses. They're, they're just not even interested. They want to rent, they want other people to take care of it for them.
And it's, it's going to shift. It's more of like that silent generation kind of perspective that we're going to see through Gen Z.
[00:29:43] Speaker A: Through Gen Z. What do you think the average age of the first time home buyer was in 2015?
It's 40 now. 10 years later.
[00:29:51] Speaker B: 2731.
[00:29:53] Speaker A: Okay, you are more dramatic than my answer. So this kills the effect.
But for that age to increase nine years in 10 years, it's kind of wild to me.
[00:30:03] Speaker B: It is. But if you look at the graphs of where affordability, where housing prices have gone relative to the increase in household wages. It's not even close.
[00:30:15] Speaker A: It's not even close.
[00:30:16] Speaker B: The only thing that's more, more concerning is the cost of college tuition. I think that's gone up even more.
[00:30:23] Speaker A: I don't even want to talk about what it was when I went to school. There was one other stat. Let me find it. That was. It was the percentage of first time home buyers in the market decrease. What do you think that is of first time home buyers in 2025 in total?
[00:30:42] Speaker B: Probably single digit. Probably so brutal.
[00:30:44] Speaker A: I don't know, 9%, 9%, 21%?
[00:30:49] Speaker B: Okay. I would have guessed even less than that.
That's for the entire nation or just California nationwide.
[00:30:55] Speaker A: Okay.
[00:30:55] Speaker B: So you probably imagine it's a fraction of that for California.
[00:30:58] Speaker A: Yeah. And that, and I think that ties back to kind of what you were mentioning earlier. The cost of a mortgage right now is significantly higher than the cost of rent, which wasn't always the case. It was always equivalent or a little bit more.
[00:31:10] Speaker B: You know, for a long time the American dream was to own your own home and do all of that. So if you look at administrations, the Obama administration was the first administration to stop pushing that American dream for home ownership. And that was a result of what happened during the Bush administration in 2007, 2008, after the crash.
So they were kind of coming to terms with the fact that, well, homeownership is great, it's not for everyone. And artificially pushing it has the potential to be really detrimental. And I think people are getting more educated in the fact that homeownership isn't always that great because along with homeownership, you also have the burden of maintaining your homes, which is super, super expensive. And I have friends, I think I've mentioned before, they call it renting the dream, where they're able to go and rent a home on the beach that's, you know, five, six million dollar home on the beach, pay $15,000 a month in rent, which is a lot of money. But if you were to buy that, that same mortgage would be, you know, between mortgage tax, property taxes, insurance, everything else, their monthly expenses would be probably closer to 40 or 50,000amonth. Yeah, so you could rent the dream and, you know, not have to worry about any of it. So I think that is affecting homeownership as well and something that's not really talked about, but I think it is an underlining cause to the reduction in transactions. And as people get more educated on that, I think it's going to continue lowering transactions and Lowering people's desire to actually own homes because it's so much easier and cheaper to rent right now.
[00:32:47] Speaker A: Yeah. I also know a handful of people that want to be homeowners, but don't necessarily want to live in the homes that, that they can afford. So they're. They own property, they rent them all out, and then they rent their primary residence.
So that's making it more competitive for that entry level pricing.
[00:33:03] Speaker B: I think that's a great idea too. It's, I think, very abnormal, especially what we've been taught, but I think it's wonderful.
[00:33:09] Speaker A: Yeah. Savvy. Savvy people still getting that investment into real estate and appreciation and then you're living where you want to live.
[00:33:16] Speaker B: Yeah, exactly.
[00:33:17] Speaker A: A tenant homeowner.
[00:33:18] Speaker B: Yeah.
But no, everything. It's getting more difficult across the board even.
I mean, you know, a lot of what we talk about for our property management division, being a landlord in California is getting more and more difficult. New laws coming up every single day.
It's difficult for us even to keep up with them. And we do this professionally day in, day out, have so many subscriptions to what's going on across the entire state. But for the independent landlord, I think their saving grace is the fact that they actually don't know what's going on. So they don't know how poorly they're doing it, but generally are doing it poorly. You know, the new refrigerator law where you have to now provide a refrigerator and make sure it's working, you're responsible for repairs as long as the damage isn't negligence. On the tenant side, you now have to accept the first tenant that meets all of your criteria. And there's a lot of changes. Security deposit law, in regards to the photos, the photo evidence required to charge anything back to a tenant. I mean, it's getting more and more difficult. So I think across the board, it's changing the landscape of our entire industry.
The multifamily, the family side. There's still a lot of money chasing deals, but there's also a lot of money in California that are just looking for ways to diversify and continue improving their return zone. Another thing I was reflecting on during the, you know, high net worth buyers, the psychological wealth of high net worth people is highly tied to the performance of the stock market, which recently, over the last few years has been just going up and up and up and up. So along with that, they feel wealthier and are making financial decisions as such. There's been talks of recession over the time. I think those talks have really gone down over the last 12 to 18 months. But that's why people with a lot of assets, those high net worth buyers, investors are making more of those transactions because psychologically they feel very wealthy with their stock portfolios doing so well. And the talks of recessions have gone down, interest rates are perceivingly going or they are going down and they're going to go down even further. So I think the majority of the tailwinds for those high net worth people are telling them to invest, especially if they're not over leveraging themselves or being irresponsible.
But it's an opportunity to get assets in generally areas that continue to increase. And mind you, these aren't, you know, the La Jollas, Del Mar, Newport Beach, Laguna Beach. Those markets don't have the same fluctuations as, you know, the Phoenix, the Riverside, the areas like that. There's much demand wanting to buy there.
[00:35:57] Speaker A: 32%. They're thriving.
[00:35:59] Speaker B: Exactly. There's so much demand that it doesn't matter.
[00:36:02] Speaker A: 2025 in general was tough and I'm hoping it's going to look a little different in 2026. It's starting to already, but mentally it needs to be a little different. So maybe that's a mindset shift for the individual and really just diving in on the numbers and understanding what's going on. Or maybe it's an actual shift that happens and with the new laws, I want to do a whole episode on what the new laws are. Are you ready to dive into that next week?
[00:36:28] Speaker B: Yeah, yeah, absolutely. New laws are going to be something that's super exciting and super important for all of us to go over. But to your point too, in regards to client expectations, it's weird because we do have clients who come to us and say, hey, I read the news, I know what's going on. Like, I know this isn't good, so let's be conservative. And we're like, wow, that's the shocking conversation to me. And I'm so excited when I have those. But we have the other ones who are like, oh, I know this market is just. Ragin is super great. We could ask for whatever we want. It's like, please tell me where you're getting this information.
[00:36:58] Speaker A: It's a happy balance. Yeah, everyone's getting it from their own algorithms.
[00:37:03] Speaker B: Okay, so I have a question for you.
What was the number one ex. What was the number one expectation you had going into 2025 that was most correct? And then what was most wrong?
[00:37:14] Speaker A: I went in with no expectations. Right. I kind of adjust to the market and figure it out.
I guess number one expectation, I just assumed it was gonna be the same. I knew it was gonna be a little bit tougher with getting deals, but I just assumed it would be the same workload. And what ended up happening was it truly felt like double, triple the amount of work to get a transaction over the finish line.
So I think my missed expectation was how hard it actually was to get deals done. I ended up having one of my best years yet, but it was not anywhere typical to the previous years. Like, I think I had a robust Q1, then a dead 2 and 3. Like I was, but working harder than ever, Working more hours than ever, trying as hard as I possibly could clients. And then Q4 ended up being really, really good as well. But yeah, I just think the workload and the distribution of the workload was not how I've ever experienced before.
[00:38:12] Speaker B: The summer sale season was dead. It was weird.
[00:38:14] Speaker A: Dead, frozen.
[00:38:16] Speaker B: Even the summer rental season, there's. There was not the normal seasonality that you. We would have in the rental market.
[00:38:21] Speaker A: I myself would freeze. I would literally start thinking about it all. Then I would just sit there and stare because I'm like, I don't even. I can't make it make sense.
[00:38:28] Speaker B: Yeah.
[00:38:29] Speaker A: It was just a frozen frozen market and we're slowly defrosting.
[00:38:33] Speaker B: Yeah. Differentiation in the market and differentiating yourself, really providing high value is. Is where people do well. Because you also saw a lot of real estate agents, a lot of investors, a lot of property managers all leave the market. They just. I think they're just fed up with it. But those who could really level up, step up, they do really well. And those are the ones that, you know, you see doing well over the years, regardless of what's going on.
[00:38:58] Speaker A: Yeah. For the new agents right now, it is not, not an easy market to break into. Agents with relationships and kind of that have built that trust over the years. They're still the go to agents and they'll do fine. I think what NAR budgeted, I know in their 2025 budget, they anticipated losing 250,000 agents. And where I think I was in an Inman conference and it was the president and are talking. And his whole point of that was because we all know NAR pissed a lot of people off, agent wise. He was like, hey, just so you guys know, we have budgeted a $250,000 or 250,000 decrease in member. Yeah. In member count. And it has nothing to do with the outcome of, you know, the lawsuits that happened or people wanting to not be a part in our. It was solely based on the decrease in agents we're going to see based on how the market's gone. Just completely not in the industry anymore. New careers, different careers.
And I do think we're going to start to see the age gap there. I know when I got into real estate, I was in my 20s and it was very apparent. It didn't click until later, but it was. You had agents, you know, very few in their 20s, some early 30s, and then it was like, like 50 year olds, that that gap was gone. But I realized later, yeah, it was the gap of agents that got into the market in the early 2000s and then couldn't hack it. But it was a very clear distinction of a group of missing, missing agents because they. It just wasn't the market to build in.
[00:40:26] Speaker B: Missing generation in the market.
[00:40:27] Speaker A: Missing generation. Yeah.
[00:40:29] Speaker B: Yeah.
[00:40:29] Speaker A: And I think we're probably going to see that again when we fast forward another 10, 15 years.
Yeah. And then we'll talk about it.
[00:40:38] Speaker B: Yes, yes.
[00:40:39] Speaker A: What else? What was your missed expectation for 2025?
[00:40:43] Speaker B: So I anticipated inventory going up significantly, which it did, but I also anticipated
[00:40:50] Speaker A: it would be like, here's my expectation. And it was. I was right.
[00:40:53] Speaker B: No. And the flip side, Okay. I anticipated transactions going up significantly and the interest rates dropping far below what they actually did, which was. I was way wrong on. Way, way wrong.
[00:41:04] Speaker A: So you thought interest rates were going to drop and they didn't. I think a lot of people thought that. But you do feel like they will continue to slowly decline.
[00:41:13] Speaker B: Yeah. I mean, all the market fundamentals the Fed looks at are continuing to point towards drops. I don't know if it's as aggressive as kind of the market wants, but at the end of the day, Donald Trump's getting in his new Fed chair, which is, I think, going to be very bullish on getting rates down. Do you now what that does to the long term? Who knows? But I, Yes, I think that's going to happen.
[00:41:38] Speaker A: I'm waiting to see because I know Jerome Powell, like openly says that they're the new chair and him are very aligned. But then I know the current administration also thinks that things are going to change there. So this guy, I'm curious to see where it ends up landing.
[00:41:53] Speaker B: Yeah, we all are.
[00:41:54] Speaker A: Yeah. Because it could go one way or the other and we'll just adjust.
[00:41:57] Speaker B: Mind you, the Fed should be completely independent, independent of what the administrative branch says. So it doesn't matter. It shouldn't matter what the white House says, but exactly. In theory, we'll see what actually happens.
[00:42:09] Speaker A: And when does that happen? May.
[00:42:10] Speaker B: Yes.
[00:42:11] Speaker A: And Jerome Powell will still be.
[00:42:13] Speaker B: He'll still be a fed governor, but not the chair. He could resign, but it's unlikely.
[00:42:19] Speaker A: I'm curious to see what all that does. There's a lot of factors that are going to play into 2026, but we'll adjust. We'll figure it out.
[00:42:25] Speaker B: We'll adjust.
[00:42:26] Speaker A: Or we'll freeze and you'll just see me frozen in my car trying to figure it out.
[00:42:30] Speaker B: Yeah, we'll adjust. We'll be fine. But we're here to keep our clients educated, keep the market educated, hopefully provide some entertainment and help people out in these tough markets.
[00:42:39] Speaker A: Yeah, we'll figure it out. Okay. And then we'll break down new laws. Next.
[00:42:43] Speaker B: Yes, next week.
[00:42:44] Speaker A: Next week.
That's a wrap on this episode of AllView360 all things real estate. If you found this helpful, don't forget to subscribe. Subscribe, leave a review and share it with someone navigating their own real estate journey. Connect with us anytime on Instagram @AllView360 and on LinkedIn @AllView Real Estate. Until next time, stay curious and keep your perspective. 360.
