It's Over, Powell Won't Save Housing - Here's Why

Real estate investors have begged the Federal Reserve to bail them out, but it's not going to happen this time, is it, Andrew Katy? No, not not happening this time. Everybody thinks the Fed's coming to the rescue, but they're grossly misunderstanding what the Fed cares about. Uh the Fed doesn't care about home buyer sediment.

They don't care about mortgage rates. They don't care about housing affordability. They don't care. They have a dual mandate.

What's the dual mandate, John? Dual mandate is stable employment and not out of control inflation. They have a 2% target on that. So, how why would they bail the housing sector out?

The prices are already so unaffordable. Let's dive into this on this call for the next couple minutes and figure out what is going on and what you need to know as a real estate investor, a realtor, or a mortgage provider. Yeah, 100%. So, if if the Fed stepped in, let's let's play the hypothetical.

Let's just say the Fed stepped in today and said, "Hey, we're going to drop the Federal Funds rate by 2%." What does that do to the housing market? I think you you immediately see an influx of buyers because there's a lot of buyers that are sidelined by affordability and they think they're quote unquote getting a deal. But in the long term, I think it would immediately drive home values higher, higher than they should be, higher than they already are, which is too high, and ultimately kick the can down the road for a future real estate reset, which ultimately needs to happen. Yeah, I mean, frankly, this housing bubble is the Fed's fault in the first place, right?

Because they came in in 2020 and had this zer policy, right? The zero interest rate policy for so long that it caused just this boom, right, in automobiles. Anything backed by debt just went up in price big time because it instantly became affordable to the masses. That drove up prices, especially in Florida, which has uh which is known and is notorious for boom bus cycles.

And it just drove prices up. It drove investors to accumulate tons of rentals. And now what do we have? We have a real estate housing bubble, at least in the state of Florida, definitely in Texas.

It's starting to show up in areas around the country. And people are saying, why is the market slowing? It's because the Fed induced this bubble through low rates. And if they do it again, it's just going to extend this pain that we're going to be seeing in the market probably in the next few years.

So the Federal Reserve as you mentioned does not care if uh does not care um about housing. They have bigger priorities and housing needs to correct. Correct. Yeah.

I mean and honestly it what you were saying is so interesting because anything backed by debt in 2020 just went through the roof. Like but everything that went through the roof has corrected except for housing. Like automo like like look at luxury watches. Luxury watches went through the roof in 2020 2021.

I was talking to a friend of mine that's selling a Rolex and he's like I could have sold this for $26,000 in 2021 trying to sell it for $14,000 today. If you bought a Lamborghini, you bought a high-end car in 2020. You lost $200,000 on a purchase like that. Yet housing is still trying to hang on.

You know, home prices went up 40, 50, 60, 70% over a period of three years and we expect that not to come back down. Honestly, it it has to happen in order for true affordability to come back. Right now, you could drop interest rates and give a a bit of a semblance of there's affordability out there, but it's not true affordability. It's just not like we actually need that reset.

And we're starting to see it, especially in a lot of the major metros in Florida. But we're starting to see that pricing come down and it's it's needed. Yeah. And one of the major issues with affordability isn't just interest rates, right?

We have insurance, we have taxes, and of course, we have wages. And wages just have not kept up. Wages haven't gone up 60% since 2020. In fact, in a lot of areas, uh people are relocating to Florida from other high-cost areas and keeping their their salaries from those high-cost areas and coming to Florida or Jacksonville to reduce their costs.

Well, the costs went right up, right? We had hurricanes. Insurance premiums are up 72% over the last five years, right? Uh taxes have have gone up with the assessments being reset every single year.

And there was this craze of Airbnbs and um you know, now we have the subject twos and the and the uh pad splits and these creative financing opportunities from these investors that caused a speculative bubble on top of just the regular supply and demand. Further, we have these new construction homes that have just popped up on every single corner of the street. Single family homes, town homes, condos, multifamily properties. I know a multif family property near me that isn't even 50% rented out and rents are already starting to come down.

So, we're starting to see distress. And I don't think that Powell, Fed Chair Powell, will come in and fix this distress by lowering rates. I don't think he's going to do any favors for the housing market because frankly it's just going to extend the bubble a little bit longer. And I know Trump has been pushing on Powell pretty hard.

Hey, reduce rates, reduce rates because he wants that as a negotiation tool with China to have us hold on a little bit longer. But man, the Fed's dual mandate is maximum stable employment and keeping inflation in line. And this stuff, like if he reduces rates, it's just going to cause inflation again. It's going to make things more um unaffordable long term.

It might give you a short-term pot, but it's going to be dangerous long term. Yeah. And and the tariffs are are already an inflationary thing just in and of themselves. And so I I frankly I've not been a fan of drum pow.

I I I'll come out right out and say it. I I think he has been arguably one of the worst Fed chairs in history. Uh what they did in 2020, mortgage rates that should have never dropped below 4% ever. That was Fed induced by the purchasing of mortgage back securities and the cutting of the federal funds rate.

And what they did is they gave a lot of people that were Prius drivers Ferrari appetites for homes. People people could go in and afford way more of a home than they normally would able be able to afford. And now all of those people are looking at it saying, "I don't want to move out of my 6,000t house to a 4,000t house for the same payment." And they created an appetite that wasn't there. But I will say as much as I am not a fan of Jerome Powell, I would not want to be in his shoes right now because because right now he has the arguably the toughest job.

He's trying to keep inflation from running. Trump's putting tariffs in place that should be inflationary that's going to be put pressure upward pressure on inflation. But we also have the labor market starting to show signs of cracking. We're starting to see the labor market crack.

So, there is going to come a point where the Fed has to step in, but they're not going to step in to save housing, to get lower mortgage rates. They are going to step in when the labor market actually begins to crack and we see unemployment rate hit that 4.5, 4.6, 4.7%. That's when the Fed is going to be forced to step in and their timing is going to be really, really tough because if they step in too soon, you're going to have inflation run again. If they step in too late, the labor market's going to crack and we're going going to go into a really deep recession.

And so I would not want to be in his shoes. I am I'm not a fan of him, but I would not want to be where he's at right now. Yeah. And traditionally, to your point, the Fed is usually late on all of their decisions.

So they usually cause too much pain and then they usually cut too deep. So they they go in magnitude and then they're always late. So it it'll be interesting to see what happens this time around. But look, we have Powell's term is up in May 2026 and Trump will be able to appoint another person.

They have to obviously be approved by the Senate, but he can hand select his next uh Fed chair and start to get somebody on his side so he can start working on negotiations. So, you know, we may see I it's very likely, especially in Florida, we're going to see a lot of pain in the housing market. There's no today there's no saving grace from the Federal Reserve. Are not bailing you out today and it's likely we're not going to see any sort of relief on the mortgage side for residential real estate in the next 12 months.

It would be very unlikely. In fact, a correction is healthy. It's badly needed. You know, prices, we did the math in Jacksonville.

Prices need to come down 31 to 39%. And you might think, whoa, those numbers are crazy. Those are the numbers that make sense for you as an investor to purchase. And it's about 28% for that prices need to come down for it to make sense versus renting a similar type of home in the marketplace.

But these things can change really quickly. If you have a top agent and who really knows the area, they can negotiate down the interest rate where it does make sense. They can negotiate down the prices where it does make sense. That's why you want to reach out to people like myself.

I can connect you with a top agent in in the local market, local area you're looking in. Get with Andrew and his team to get the get your loans done and and uh he can help you figure it out whether it's new construction, it's an existing home, town home, or condos. Right now, my personal preference is always go for the single family homes. Right now, we're seeing a huge glut of inventory coming on for the condos and town homes.

And the association fees are building up rapidly. I mean, there's a a town home I was looking at yesterday. The association fee monthly was $74. People can't afford those type of association fees on a monthly basis.

So, people just look at that and they just walk right past those listings. And so, those listings are going to sit stale unless you have massive price reductions. Yeah. I mean, I mean, if I would add to that, I would just say we have to adapt to the market we have and not try and wish a market that doesn't exist into into reality.

There are options. I mean, the one thing we are seeing a lot of is sellers are motivated to sell. There are so many listings. Um, how many in in the Jacksonville market, how many net listings per week are coming on?

Yeah. So, this is a great question. So, I actually ran the numbers before this call because I I like to check it weekly. I like to see how many listings are coming on.

So, net active listings for this week over the last seven days is 1,077. Now, the reason why you're not seeing inventory go up and skyrocket the way that it traditionally does is two reasons. Number one, people are cancing their listings and they're expiring their listings and it's to the tune of like a thousand. But the reality is these expired or canceled listings within the next month or two, 60% plus of those will come back on the market.

And we're going to see this next wave from June, July, August of tons of inventory of people scrambling to sell their homes before the before August, before school starts. Once school starts, we see a drop generally for just from seasonality in the state of Florida of about 50% from the buyer side. So, if you're a buyer and you're hearing this, you're going to have you're going to be so valuable to these sellers where you can cash them out of their property. They've been sitting on it for 6 months.

The longer that property is on the market, the more you're going to be able to generally negotiate with that seller. You need a top agent to be able to guide you on that and get you the best deal. If you're looking to buy and hold for the next 10 years, it it really probably makes sense from a financial standpoint to buy. If you're looking to buy and sell it within the next year or two, it might make sense to rent, but it might make sense to buy if you have a top agent who can negotiate the right terms for you where you're going to be able to hold that asset long term.

So, get with somebody who actually knows what they're doing. And just to put this stat out there, Andrew, and I know you work with a lot of realtors, only about 20% of realtor sell enough to be a professional. And that's being generous. And what I mean by that is they have enough reps and enough market knowledge and enough negotiation skills to be able to transact in a big way and save their buyers thousands of dollars.

So I know we started off with the Fed's not going to save you, but the reality is you need to save yourself and the way you do that is by interviewing and choosing the top agents. That's why we started Momentum Realy is we wanted to partner with top agents in the local market and have them serve clients at the highest level. We're saving customers tens of thousands of dollars. We got one uh agent who told me they say saved $150,000 off of new construction last week.

So again, interview your agents. It is crazy. And and that's a that's a really powerful tool, too. Going after new construction, this the second, third, fourth phase of construction where these builders are trying to, you know, sell these properties as fast as possible to get their cash back.

Yeah, there's there's a lot of sellers buying down your interest rate. There's a lot of things happening. We're seeing it. We're seeing it left and right.

I mean, I just locked in a couple days ago a 6.375 conventional loan, way below market. Sellers paying that price to to buy that down because the seller wants to move their property. So, I mean, people are still buying. People are still selling.

There's still transactions happening. But I think it's more important now than ever to be teamed up with a true professional. And when you say, you know, 20% of real estate agents, you know, make the professional, I would say it's probably even worse on the loan originator side. The average loan originator closes 0.25 two, five loans a month.

Wow. Months. And I'm like, you're doing you're doing four deals a year. Like, okay, that's that's great, but you have no skill level built up with that.

Where you get skill level is when you're doing 5, 10, 15, 20 closings in a month, and you see the multitude of transactions. The other thing we're starting to see a lot of, and I don't necessarily think it's a bad idea right now, if you're a home buyer that stumbles on this video, or a home owner that stumbles on this video, and you're finding yourself financially in trouble, and you bought your home in 2018, 2019, you have equity, we need to have a conversation. I just ran a scenario for a a veteran today that is going to save about $800 a month in monthly payments by doing a cash out refinance going up a little bit in interest rate. But $800 a month for his family that just had a new baby is going to be a lifecher.

And so it's not always the fun conversations to have to say, "Hey, I'm going to get rid of this 575 rate and I'm going to go to a 6% or a six and a quarter." But if it makes the most financial sense, that's a conversation that needs to be had. And I see a lot of people laden with debt that are just they're afraid to have that conversation right now. Yeah, that's so good. And I'll just make a quick antidote on the um on the seller side.

I had a a a seller reach out to me saying, "Hey, my agent isn't performing. I need to move this property as soon as possible. I need to move locations. I have another new construction property out of state under contract.

I need to sell my house ASAP in the next 30 days." We took that listing over. We changed the photos. We changed the price. And then we used that price change, went to the builder in the other state and said, "Hey, can you come down on your price to work with us to make the numbers work?" Cuz she needed the money out of her house here to be able to move into the into the house over there to make the deal work.

What do you know? Within 24 hours, we're under contract with a buyer after it sat for 30 days with with like very few showings and basically no interest. You need to get with a specialist who knows how to do this. Reach out to me.

I can connect you with the top person in your area, hyper local, around the corner from your property, who gets it, who just gets the market and does a ton of sales and is able to negotiate. I will also personally help you. So, me and Andrew are here to help you along your home purchase or your home sale process. We'll drop our information below.

If you want more economic data, you can follow me on Substack, Think Big, Question Everything. The link will be below. And make a make a comment. If you have comments about this Fed announcement, about the real estate market, comment below.

We'd love to hear what you're talking about and what you're seeing on the ground dayto day. Andrew, anything you want to leave us with? No, I mean, listen, there's there's still transactions happening, but if you bought a home in in 2023, 2024, there's a high probability that that values are coming down off of that. And it's just it's just being very honest in the state of Florida specifically.

Uh that doesn't mean that it's the end of the world. I mean, listen, if you would have bought a home in 2006 and you held that home until 2015, you made money on the home. So, it's like any investable asset. You don't lose money until you sell it.

So, don't panic if you're if you're looking at it saying, "Oh my gosh, my house is now worth $15,000 less or $20,000 less than I bought it for." That only really matters if you're selling the home today. Like, like what goes down does come up. We do believe I know I can speak for John on this. Real estate is a wonderful, amazing long-term investment.

Yeah. But nothing goes up in a straight line. There are going to be resets in cycles and I do believe Florida, Texas, and some other states, we're seeing that reset begin and and pick up steam. A Amen, Andrew.

I mean, that's a great message. And just know there's a solution for everything. So, the key thing is if you're in trouble, reach out. We have solutions for property management.

We could rent out your house, right? And that'll cover your mortgage for you. So, you can still get on your way um and go where you need to go. If you have to, there's no other option.

You can short sale. We have people who can do subject two and do creative financing. We don't always recommend that. It depends on the circumstance.

Andrew Katy can refinance you so you can consolidate your debt. If you got a bunch of credit card debt, you need to wrap in to the equity that you have. But the key thing is get in action now. I don't think waiting is going to serve you.

Reach out, connect now, and and start making movements because I think between August and and have a plan between August and February of next year, I expect the market to be very challenging, and you want the best of the best on your side during this time period. With that, Andrew, awesome seeing you. Until the next time, take care. Take care.