Krystle Moore, Pacific Shore Capital CEO, and Kenny Simpson, The Simpson Team Mortgage Advisor, join Yahoo Finance Live to discuss the real estate market and trends in the housing market.
DAVE BRIGGS: New housing numbers just released suggest it's getting tougher to sell your house. Redfin says it now takes 23 days on average, a historically low number, albeit one that's been ticking up steadily in recent months. For more on the housing market and where we're headed, we welcome it Krystle Moore, CEO of Pacific Shore Capital, and Kenny Simpson, The Simpson Team mortgage advisor.
Together they are the hosts of "Get in the Cash Flow Game." Nice to see you both. Krystle, we'll start with you. Homes are still moving, but do you see this dynamic shifting in favor of buyers today? I think we're on mute there, if you can hit that button. Can you hear us, guys?
KRYSTLE MOORE: Yes.
KENNY SIMPSON: Yeah.
DAVE BRIGGS: There we go. Go ahead. Start from the beginning, if you would.
KRYSTLE MOORE: All right. We're definitely seeing a shift from a seller's market to a buyer's market. And we've been seeing that for at least a few months now. So now is the time where buyers can actually ask for more. We're not having to ask for no contingencies going in, and going over-list, we're not seeing those things happening anymore. So buyers definitely do have the upper hand.
SEANA SMITH: Kenny, if you're going to the negotiating table right now, buyers having the upper hand, what do you need to know if you're a seller? Because certainly, it seems like this market is changing on a daily basis.
KENNY SIMPSON: Yeah. I was walking one day. And I came up with this concept. The sellers want the price of yesterday, and the buyers want the price of tomorrow. So this gap is slowly closing here. And so if you're a seller, and you're listing your property and you're being unrealistic, it's just going to sit there. And buyers know that. They're smart.
There's so much media now. So you're either going to get a lowball offer, or you're just going to sit there.
DAVE BRIGGS: A lot of data has been pouring out day after day, really showing a pullback or a cooling of this market. Mark Zandi, in particular, chief economist at Moody's, he says housing is, quote, struggling, home sales have cratered. Krystle, step back, 30,000 foot, where do you see this housing market headed? Is it headed for a crash or just a slight pullback?
KRYSTLE MOORE: I can see where he's coming from. But my personal opinion is that we're not going to see this massive drop in home prices. Part of that is the fact that we have such a shortage of housing. So we've also never had so many young people coming into the housing market that want to purchase homes today.
So that's why we're in a little bit of a different situation than we were in the last recession where that was more of a financial crash. This time around, we have good financing. It's conservative. Not everybody can get a loan. And we've got this influx of new buyers coming into the market that we didn't have the last cycle.
SEANA SMITH: Kenny, home prices that are coming down a bit, how big of a drop are we seeing? How big of a drop could we potentially see over the next couple of months?
KENNY SIMPSON: Yeah, so it depends on where you are, right? So for example, we're sitting here in San Diego, California. We always have an inventory problem. And we're just not there. But if you look at places like Utah or Arizona, Texas, Florida, they're just getting more homes listed on the market. So I think it's going to be more city by city, state by state.
So you might see a bigger housing correction in Utah or Phoenix than San Diego or Los Angeles because we just don't have the inventory. And so what could you see? You could see anywhere from 5%-- and we might see 20-plus-percent in certain markets.
DAVE BRIGGS: And Krystle, you guys are both real estate investors. And you help coach people through that process. What's been the biggest change, do you think, in the last couple of years? Because that has been a huge difference in real estate markets is the amount of investment going on. And also, is this a good time to invest in real estate?
KRYSTLE MOORE: Absolutely. It's definitely changed over the last few years. Part of it, I believe, is media. There's a lot more access than there ever was. So it's been extremely competitive. So what we've been seeing-- and actually not even so much in California. It seems that investors are not flocking, like they do other in other states, to California because of our landlord-tenant laws.
But in other states, what we're seeing is you know 20, 30, 40 offers on buildings. And I'm hearing from other buyers and investors that they're making offers on 50, 100, 150 buildings before they're getting offers accepted. So we have seen that shift this year as rates have risen. Many investors are kind of taking a back seat to see what happens.
And as far as whether or not it's a good time to invest, my personal philosophy is that there are always deals out there. So my kind of advice is the same. It's that you have your criteria and what you're looking for. And as long as the building meets that criteria, then it's absolutely still a good time to invest.
SEANA SMITH: Well, Krystle, how exactly do you find that perfect deal? Because I think many people might want to invest in real estate, but they take a step back and say, hey, this is a heck of a lot of money. Things can change on a dime. So how do you know when is the right time to really pull the trigger and jump in, if that makes sense for you?
KRYSTLE MOORE: So as an example for me as an investor, I'm looking at, let's say, a 5% return on market. So if I'm going to run all my numbers, especially in a market like this where there's a little bit more rate volatility, that's where we're seeing deals fall apart as people's rates aren't locked. And then rates go up, and the deal doesn't make sense anymore.
So what we are advising people to do and what we're doing ourselves is underwriting our deals with conservative analysis based on interest rates going up. So let's say today's interest rate is maybe 4 and 1/2 percent. I'm going to underwrite it at a 5%, at a 6%, even maybe even a 6 and 1/2 percent interest rate, just to make sure-- at what point does this deal not make any sense? At what point might I have to come back to the seller for a price reduction?
So I want to have all those numbers laid out and have a pretty frank conversation with the broker about what our goals are and what we need to hit and what kind of volatility that we're facing.
DAVE BRIGGS: Great stuff. Kenny, we want to close with some news the viewers can use. You have some tips for buyers and for sellers in this environment. What are they?
KENNY SIMPSON: Buyers, simple. Don't hesitate. Everybody's sitting on the sidelines. They're waiting. Don't wait. If you see a house that's on the market for 30, 45, 60 days, it's because the seller is unrealistic. So they're either going to, A, take it off the market or, B, lower the price but just give them an offer.
So what I'm seeing is, hey, we are seeing an uptick too as summer comes an end, everybody's back to school, is buyers are starting to get those reductions, whether that's in 5% off the list price or that's in paying closing costs. So my advice is get out there. Make some offers. And you might have to make more offers. And don't worry about if you upset a seller because they think you're low-balling them because maybe that's the price they're going to have to live with.
And if you're a seller, unfortunately for you, yeah, it's becoming a buyer's market. So if you're over-listed and you're sitting there, buyers are smart. You're probably just going to either have to lower the price or take it off the market.
So if you're waiting for some miracle to happen, I don't think it's going to happen. It's just the reality is this is the new market. And we're going to have to accept it. Also with sellers is this is the time also if your house is not the nicest house on the block and you were able to get that price, you're going to take a bigger haircut than the guy down the street that has the newer remodeled house. And so you have to understand that. And you've got to really listen to your agents and trust their opinions in making sure you're working with the best.
SEANA SMITH: Dynamics certainly changing in the housing market. All right, Kenny Simpson, Krystle Moore, thanks so much for joining us this afternoon.