Homes with Benefits the Home Appreciation Story!

Rick Ripma  0:00  

Homes are appreciating, is that a good thing? Or a bad thing? And how does appreciation affect you?

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Advisors Mortgage Group is proud to present Indys Real Estate Gurus hosted by Rick Ripma, the hard working mortgage guy, please contact Rick for all of your mortgage needs at HardWorkingMortgageGuy.com That's HardWorkingMortgageGuy.com. Now, here's the hard working mortgage guy, Rick Ripma.

Rick Ripma  0:39  

Thank you for joining us. I'm Rick Ripma, your hard working mortgage guy and I'm Ian Arnold and Advisors Mortgage Group. And this is Indy's Real Estate Gurus. Today we're going to talk about appreciation. And there's appreciation, there's depreciation, and there are lots of areas here to talk about. Before we do that, though, we're going to go over the numbers. And MIBOR, the Metropolitan Indianapolis Board of Realtors has brought out the numbers for June of 2022. So, we're going to look at how they were in June, and how that stacks up to May. And a lot of this is really important because if you are out there listening to the media, there is a media that loves negativity, I guess not a media, the whole media, and they are really beating on that we're seeing a slowdown in housing, that housing is going to collapse that the home market is going to get worse. So I want to help dispel that with facts. Not with their feelings about what they think or the fact that they just want to scare us all so that you will listen to them and watch what they have to say and read what they have to say. So with that, we're going to start on the median sale price and June of 2022 and this is in the metropolitan Indianapolis Board of Realtors area. I don't know the exact number of, different areas that are in that but I believe it's I know it's all the surrounding counties. It's like Bartholomew, Boone, Brown, Decatur, Hamilton, Hancock, Hendrix, Jackson, Jennings, Johnson, Madison, Marion, Montgomery, Morgan, Putnam, and Shelby County. So

Ian Arnold  2:31  

it's not that you didn't know them all.

Rick Ripma  2:33  

I didn't I had a note. Well, you know, you know, I'm getting old, you keep telling me that. So I better you know, I have to, I have to have my notes. Hey, that's what notes are all for. That is what they're for. So $300,000 was the median sale price for June of 2022. That's up 3.8%. month over month. So what was it in May?

Ian Arnold  2:57  

In May, we were up 4.6. But the average median price was 287.

Rick Ripma  3:04  

So we went up, we went up. We went up again. Yes. All right. Now they're telling us that the market is falling apart? Our median sales price went up? Yeah. Even with increasing interest rates,

Ian Arnold  3:15  

increase in interest rates and inflation. I mean, look at I mean, everybody's you're still willing. People are still willing to spend to get their house. Yep. Is what it comes down to. Yeah.

Rick Ripma  3:26  

Now, how about another area that you would think would be if we're in a housing crisis or nearing a housing crisis? close sales, you would think that we would have done our not only what our median price have gone down, but close sales would have gone down? Correct. And we had the exact opposite? Yeah, we were up 9.2% month over month, for June of 2020 to 3711. Homes closed. How does that compare to May?

Ian Arnold  3:54  

May, we are at 3300. So we close on roughly another 400 houses? Yes.

Rick Ripma  4:01  

Crazy. And they're telling us that we're in a market that is falling apart? Now, average days on market. Now. Last, or this month? We're at 14 days on market. That's a increase of 7.7%. But it's a

Ian Arnold  4:20  

increase of one day. I mean, last month, we were at 13 days, so the month before that it was at 15. So is it really a big issue? 13 to 1514? No, no, it's basically all the same. Compared to historic. Yeah, I mean, it's considered historic. It was months. Yes. So yeah, I mean, if you can sell your house in two weeks. Yeah.

Rick Ripma  4:41  

I think they say a healthy market is 60 days. Okay. I may be a little off there. But that's, that's a healthy market. Let's compare that back in 2008. There were homes that sat on the market for over a year.

Ian Arnold  4:55  

I believe it that I mean, that was a really bad time.

Rick Ripma  4:59  

It was over a very bad time. But that's what they're comparing us to. We've been at phenomenal numbers. And then they want to compare, which we'll talk about a little bit later. They want to compare numbers. It's just not even the same market. But that's how you scare people months inventory. This is another one that that month’s inventory back then was like 910 11 months of inventory. June it was point nine, how does that compare to May was point seven, right? So and what happens every year, that increase happens every single year. When you look back, it happens every year. Why? Because more houses come on the market right then. But more houses came on the market, and more houses sold. And the builders are still putting specs on there that haven't even started yet, which hurts a lot of these numbers. And yet, our numbers are still unbelievably strong. And then the act of versus sold the price range, all that stayed, you know, pretty much where it was it got a little better All in all, not really something we are easy to talk about without seeing actually seeing the numbers. But that is the difference between what we saw in May and June. And also what we saw as a difference between 2008 When everything fell apart to 2022. Now there's some additional insight we wanted to talk about. The listings numbers, what do you have those handy?

Ian Arnold  6:37  

The new listings for this are 4,925. I mean, that is up from 4,249. So basically, it's 700 700 more houses

Rick Ripma  6:50  

are listed, right, which is exactly what we're talking about. That's what happens this time of year. That's exactly what happens. It's what was expected. So if they if there are media out there trying to say, Oh, look at this, that's not a negative, especially when you look at how fast we sold our houses, and how many homes we sold in June. Another number that we should probably look at is the act of inventory. And I think this goes to kind of what we talked about too. I want to talk about the active inventory. Because I think if there are people out there thinking, you know, maybe have given up looking for a new home, maybe have you know set down this just isn't working because of the increase in listings. What's happened to our active inventory,

Ian Arnold  7:39  

the active inventory is going to go I mean, is active inventory has gone up quite a bit. In one

Rick Ripma  7:46  

month. Yeah. 47.3% up?

Ian Arnold  7:48  

Yeah, basically, we were at 2,300. Last month. Now we're at 3,400. So basically 1100 houses are in the new active inventory. Right. So I mean, what that your buyers are pretty consistent right now on how many people are trying to look for a home. So but if you put more homes out there, the number of people gonna be bidding on that one home might drop a little bit, which helps out a lot. Because you go from bidding against 20 people to bidding against 10 or 11. That's a big difference.

Rick Ripma  8:22  

It is a big difference. And it's but it is it's a big difference in the number of people out there. And there's not a huge difference, really. But it doesn't matter, because there are still more people looking for homes and our homes on the market. Yep. So we're still seeing overweight with a 52% sold for higher than list price. Correct. We're selling houses in six and 14 days compared to 60 65 70 days. We're selling homes at the high at a high median price. Our inventory month is point nine in our area. I mean, these are tremendous numbers. We believe these numbers will go down. In other words, it's going to soften some we don't believe that the market is going to go the other way.

Ian Arnold  9:12  

Correct. I mean, it's going to take for the market to go the other way. Basically, you'd have to have a genie, and poof, there'll be 100 million homes available right now. I mean, there's what the issue is supply and demand.

Rick Ripma  9:25  

Right? And why do we have a lack of supply? Because one

Ian Arnold  9:29  

is the builders have stopped making as many houses or building homes, right, like years ago. This is something 2008 Yep. It's been in the works for a long time. And now it finally caught up. Because once the baby boomers had kids, we talked about this they reached 30. Now they've started reaching that 33-year age where that's the average that somebody buys a new home right well guess what? This was they were not ready for this. And then when we dropped the rates everybody wanted to buy homes, you no matter what age you were in, people were like, This is the time to do it. So then those houses that were there just flashed off right in a blink of an eye. And now we're going to be recovering from this for a while,

Rick Ripma  10:13  

right? Because we built three, the last number I saw was somewhere around 3 million fewer homes than what we actually needed. The number of families has increased since 2008, to 2020 to 13 million nation nationwide. So we have a huge lack of inventory. And we're going to have a lack of inventory for quite some time. So it's very difficult to see how this market is going to get really soft. The other thing that's happening is we talked a little bit about inflation, we should probably talk about that just a tad. Inflation was super hot and is still super hot, and it's going to get hotter, it's not going down, it's going to get worse because they do it year over year. And the numbers for the last for the next three months a year ago were very low. And that's like point 4.3 And point five or something like that. And what did it come in? recently came in at 9.1? Yes. And it was a 1.2 increase for the month. Yep. Okay, a 2% increase for the year. A year ago, two years ago, we were only increasing to 1.2. For the entire year, we had that in the month, in the month, that is crazy. And that people will look at that now that's inflation is going to create and all of the indicators are showing that we are I believe we're in a recession. But all the indicators are showing we are definitely going into a recession, no matter what the government wants to tell us. We're going into recession. Yeah. And with that, what happens to housing prices,

Ian Arnold  11:53  

housing prices are gonna go up, right. And

Rick Ripma  11:56  

generally, that's what we've seen historically, they go up, and what happens with mortgage rates,

Ian Arnold  12:01  

they're gonna go down.

Rick Ripma  12:02  

That's what we see historically. So we can't say that, yes, this is what's going to happen. But we can certainly say if you look back at history, that's what happens pretty much every single time. So I think it's one of those things where we're actually in a very, very good market, very hot market. But we're also up against the break. So after the break, we're going to talk about appreciation. We'll talk maybe a little bit about depreciation, how that's going, how that affects people, and how that affects, you know, what they might do with their homes.

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Rick Ripma  12:45  

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Ian Arnold  12:58  

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Rick Ripma  13:53  

Welcome back and thank you so much for joining us. I'm Rick Ripma, your hard work and mortgage guy and I'm Ian Arnold with Advisors Mortgage Group. And this is Indy's Real Estate Gurus, if you would have any questions for us about mortgages want to talk about you know when to look at refinancing, maybe you're looking to purchase a home need a pre approval, give us you know, contact us you can go to HardWorkingMortgageGuy.com That's HardWorkingMortgageGuy.com. And you can get all of our information there and you can contact us from there.

Ian Arnold  14:21  

Also, if you did miss our first 15 minutes of this, and you would like to hear more or even the past ones we do again, we put all over our shows on our podcasts in Indy's Real Estate Gurus again, that's Indy's and sometimes you got to play the 's. Real estate gurus or you can look under Rick Ripma or Ian Arnold. Yep, almost shows up every time. So now it is the question of the week. Now it's time for questions with the gurus. The question of the week is brought to you by Debt Crusher mortgage improving your life by lit relieving the stress of debt. And again, this is what we do is consolidate your debt

Rick Ripma  15:04  

into your mortgage. Right debt pressure is, as a program that we offer. We do. Yep. And we

Ian Arnold  15:09  

specialize it and we help countless people in there. So if it's something you think you might be interested in, definitely give us a call.

Rick Ripma  15:17  

And here's why. Here's what I think is really the best piece of the program, or at least one of the very strong pieces of the program. It's really how we present it. It's the program that we have to put everything in there that a customer, a prospect, somebody looking at me looking to refinance can play with that they have the ability to, to it's interactive to use to change things, so they can see how it would affect them, and how it's going to affect their mortgage. And their and their really their finances for quite some time.

Ian Arnold  15:49  

Yep. All right. So last week's question is what has one eye but can't see a needle? I know there's some period where I got that one thing. We got a couple emails on that. But so the new question is, what can you put in a pocket to make it wait, or put in a bucket to make it way less? Yeah, you guys think on that one for one week? Yeah, that's,

Rick Ripma  16:16  

that's a good one. So

Ian Arnold  16:16  

we're sitting here and we're talking. Mostly you hear about all the appreciation in a home. So there are basically there's one type of appreciation because it's in price at home. But there are two types of people. So if you Let's go with if you already have a home, Rick, and what does appreciation mean to somebody who already has a home?

Rick Ripma  16:40  

Well, appreciation is how you build what we call equity. Right. And it's also how you build wealth when you hear people say, and I'm not, I'm not saying this is 100% true, or it's not not the only way to build wealth, but one of the ways to build wealth is down real estate. In fact, if you think about it, let's let's look at the appreciation last year 2021. In Indiana, our appreciation rate was 19%. Now, that doesn't mean every house increased by 19%. Some increase more, some increased less. But that was the average appreciation rate. So let's take that average appreciation rate. And let's say somebody has a home, and it's $200,000 house. Now couple things doesn't matter whether you have a mortgage or not appreciation is not affected by whether you owe anything on the home or how much you owe on the home. It just, it just happens because it sits there and it gains value. So if you have a $200,000 home, it appreciated at 19% for a year, that's a $38,000 increase in your net worth. So your house went from 200,000 to $238,000 in value if you did the average increase of 19%. Now you didn't have to do anything.

Ian Arnold  18:01  

You had to live in your house. Yeah.

Rick Ripma  18:03  

Do anything you don't normally do. Right? There's not Yeah, nothing Correct. You're just that just increased your net worth. If that continued to happen. It's incredible on what it would what it would actually do for your for your wealth. And I did this on a $400,000 house because I thought it would be interesting, I use the 5% appreciation because I think 5% was what we averaged over time. Yes.

Ian Arnold  18:33  

On regular months and regular years, and we'll get into more of this in a little bit, is it's about an average of five and here in Indiana.

Rick Ripma  18:33  

Yep. So 5%. So in a $400,000, home at 5%. After one year, drums were 420,000. So they made 20 grand. After two years. It's 441,000. So now they're at $41,000 after three years because this is compounding interest. After three years, it's $463,050 After four years 486,202 And after five years $510,500 Kind of reminds me of that that story where the guy says I'll do that I'll do I don't remember what it was but for a penny a day if it's doubled every day, and I'll do it for 30 days. Never before are you giving me a million dollars today. Are you kidding me and it's just worth so much money. So that's the number at 5%. Now we increased it 19% So I did it just added 20%. The first year if you have a $400,000 home so last year, if somebody increased just a tad higher than the average and they had a $400,000 home, a 20% increase took that home to 480 $80,000. The second year if we kept that 20% would be 576,000/3 year be 691,004th year it'd be 829,000 And the fifth year would be $995,000 A four $100,000 house almost went to a million dollars. Now. I did that because I wanted people to understand that that's why we can't continue to have 20% increase.

Ian Arnold  20:10  

Yeah, I mean that that is outrageous. I mean, that would be that would hit the whole cost of living too expensive. that would that would be a blow up to the market.

Rick Ripma  20:19  

That would be really, I mean, it's, that's what that's what has happened in other areas. Let's take California, you can see that happen. But when that happens, you also see big times when you see big depreciation, because you can get that things adjust the 5%. You don't have much of an adjustment very often. No. In fact, I think you have some numbers on that for Indiana. Oh,

Ian Arnold  20:41  

basically. And for since 1992. It's been an average of about 5%. So now once you hit about 2015, then it started going up. And lucky me Yes, when I bought my house was 2015. So I bought it at the right time. But I should have actually bought it a little earlier because the depreciation actually did happen. And you You are definitely in the market during this time when I mean in the market, you were in the housing market sort of deal. So back in 08, when we had the big recession, even a little bit before that what we saw was a small decline. And then in 2007, there was actually you actually depreciate in your house, but how much have you depreciate roughly four, negative 4%. Then in 2008, it went back up, about 2%, nothing great, but it offset the negative for a little bit. Then in 2009, it dropped again, this one was the highest drop we've seen in 30 years, negative 6.6. That was when in 09, okay. So and then in 2010, it went up another 2%. Then it dropped in 2011, again for about another 3%. But then it went up. And you know what it's done since 2012, up, up, up. Even a 2018 was almost 10% or 8.1. And then 2020 to 8.1. I mean, so this has been going on for a little while. And the nice thing and three. So if you own a home in the last 30 years, it's only decreased three times out of out of 30 years. 27 years you've increased, right? So if you had a 30 year mortgage, and you bought it 92 You'd be sitting phenomenal.

Rick Ripma  22:37  

Yep. You know, it's funny, because to that point, I bought my home in 1990. And in 1990. I I just looked at what I what I paid for it and what what its value is approximately, and my home is increased by 286%. Oh, yeah, it's crazy. 280. Now that's over a long period of time. Yeah, that's a pretty good increase. And something you're just sitting in there living in anyway.

Ian Arnold  23:09  

But if you're talking about creating wealth, that's what it goes to right then. So imagine you paid off your house in 15 years, how much? I mean, look at that wealth that you have there. The other thing that we definitely need to hit on is the appreciation what it does for somebody. Yeah. And we've seen this quite a bit. So when people who bought their house two or three years ago, guess what they did they refinanced because that appreciation allowed them to get rid of their mortgage insurance if they had their mortgage insurance, which is awesome. It also allowed them to do some renovations to their home. Correct. So especially last year, we saw this a lot where people couldn't go on vacations. So they were like, Hey, let's refinance, we'll do a cash out. And Mommy wants a new kitchen. Let's Let's get her a new kitchen. And so they did a cash out refinance. So this appreciation when you have a home, that's what is able to help you with,

Rick Ripma  24:07  

right so they got out of mortgage insurance. Yes. Some people that some people did both they were able to went up so much. I got a mortgage insurance and they were able to do some, some cash out to pay to do some improvements on their home. Some people refinance their house, what's they're still doing today? paid off debt. Yep. Okay, so there's there's a lot of ways, then those aren't even the only ones but those are ways that you can use the equity to your benefit, especially as houses continue to increase. What is it the increase been this year? It's what 12% or no higher now? 20% It's close. Yeah, it's ridiculously high. Again.

Ian Arnold  24:45  

The other thing that they don't get into too much is what has it done for foreclosures? Because it's decreased by dramatically. People aren't foreclosing on their homes. So just a look. I fell on hard times, I'll say Sell it. So you don't see a lot of many foreclosures like point 5% Or something like that I saw. And I was like, wow, that's actually and it dropped dramatically, because with that appreciation recently, people can just sell their homes. Yeah.

Rick Ripma  25:12  

And I think back in 2008, I will probably be a little off, but it was like five to eight times that. I think it was like 3.8%. Yep. I mean, it's ridiculous.

Ian Arnold  25:22  

All right. So what would you do for appreciation? Does it have an effect on people looking to buy a home?

Rick Ripma  25:31  

It does, what you have to look at is, here's, here's the hard part of the appreciation. When you're looking at a home, you're looking at a home, and you're and you and you see what especially a 20% increase in value. You're looking at home lat what that somebody made a paid for a year ago, two years ago, three years ago, and what they're asking for it today. And, that that can be a problem for people mentally. Although it's not it's not an accurate comparison, what it was worth three years ago, doesn't mean anything. It doesn't mean it's it doesn't relate

Ian Arnold  26:02  

correct. It's like your house. Right? And that you were just talking about you bought your house in 1990. Does that price affect anything to now?

Rick Ripma  26:10  

No, no, no, it doesn't. And it shouldn't, but it does mentally?

Ian Arnold  26:14  

Yes. When you see it, when you're looking you do it, you're like, wow, they did this. I mean, even when I bought my house, the realtors like hey, look, we're going back, and we're haggling and all that stuff. The realtor actually pulled up he goes, this is how much money this guy made on it. And I was like, Oh, okay. And for my instance, they were just trying to get rid of the house. So they only made like three grand. So I was like, okay, whatever, and then called it a day. But yeah, sometimes they hit you harder, man, they just made $100,000.

Rick Ripma  26:45  

But in reality, that has nothing to do. What you should look at is going okay, and this is the other piece of it, as you look at you go, okay, that I have to pay more. But if it increases, it continues to increase. Let's say it stops, it increases at 5%. We talked about those numbers, an increase of 5% a year adds up.

Ian Arnold  27:03  

Yep. And the sooner you do it, the sooner it starts helping you exactly. Because if you wait, guess what you don't get you don't get that appreciation, you're going to pay that appreciation, when you go to buy the house. That's what you don't think of so if like we use that 5% If you waited three years to purchase a home because you're waiting for something to happen, you are going to show you're going to be paying 15% More than when you're in that because a compound Yes. Or you could have 50% more equity in your house because you already bought it

Rick Ripma  27:37  

right. And if you're running, I mean, that's just where you are, you know, it's you, you're spending the money, you might as well buy a house, this market is good. Our numbers show that it's way up and an increase in value. So appreciation is really there. If you own a home, it's your friend, for sure. Well, we're running out of time. So we do appreciate you joining us. I'm Rick Ripma, your hard work, and mortgage guy and I'm Ian Arnold with Advisors Mortgage Group. And if you would like to contact us have any questions, please, you know, go to HardWorkingMortgageGuy.com That's HardWorkingMortgageGuy.com. And next week, we're going to talk about how do you qualify for a mortgage? And we're also going to talk about when should you consider refinancing? And then, you know, how much should you save for a down payment? These things are some of the common questions people are asking today. And we want to go over those questions and really help you understand the mortgage and how everything works. Again, thank you so much for joining us. Have a great weekend.

Announcer  28:42  Brent NMLS number 33041 Recruitment NMLS number 664589. Ian Arnold's NMLS number is 1995469 equal housing opportunity, some restrictions apply.