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Housing market isn’t ‘headed towards any kind of crisis’ despite sinking mortgage demand: Expert

Rogers Healy Companies CEO and Owner Rogers Healy joins Yahoo Finance Live to discuss the decline in mortgage rates and how it hasn't affected demand, along with how he helped NBA legend Shaquille O'Neal find a new home in Dallas.

Video Transcript

- All right, what's ahead for the once hot housing market? Mortgage rates today plummeting to 5.3% on a 30-year, that's the largest drop since 2008. Rogers Healy is the owner of Rogers Healey and Associates Real Estate. He joins us now from Dallas, where it looks like the stash has fallen along with the mortgage rates, my friend. It's tragic.

ROGERS HEALY: He fell off right as I walked in.

- Mortgage rates and mustaches, it's all falling. All right, so we know what happened in 2008.

ROGERS HEALY: It's been a dramatic day.

- I know, I'm sorry for you. Could we see something like 2008, or is there any similarity between these two markets?

ROGERS HEALY: Yeah, you know, and first of all, you never know what's going to happen. I think we've learned over the past few months that it's all, you know, it's all unpredictable. And I think that keeps people like me on my toes. And so I think that, you know, we're still going to be in a pretty stable run here coming up. But you know, what's interesting is the mortgage decrease, as far as the rate today, it's still higher than it was two months ago. So to be above 5% is still substantially higher than it was in late and early spring.

But I don't think we're headed towards any kind of crisis. I don't think that we have any numbers that support a housing crash. I think that it's going to give people an opportunity that had been waiting the last few years because mortgage rates have decreased. Inventory has increased, and so hopefully, it's going to create a whole different opportunity for people that have been waiting.

- And obviously, we did have a lot of people waiting on the sidelines, and that was for a lack of inventory. And then of course, you add in the mortgage rates and the interest rate hike from the Fed, and that sort of really did put people off. But what are we seeing now that we're seeing inventory is climbing up about 18.7% year over year? But is it going to climb fast enough and at what point to match the demand that's out there?

ROGERS HEALY: Yeah, I think kind of the thing that people aren't really discussing is this is normally a slower time of year. And so when you have interest rates that are higher than they were a year ago, even though inventory is a little bit higher, as well, you know, I think that we're going to have a little bit of circumstances that are unforeseen. But I do think that there has been a really big pickup the last two weeks. And then hopefully, this week and next, we're going to have people come out of the woodwork because the other thing that people aren't really mentioning that often is that rental rates are at an all-time high.

And these people that purchased properties two years ago and prior, they're building at a time that they have to go recoup the costs that they went and overpaid for the land. So I do think we're going to have an influx of buyers between now and probably late November.

- So at that 30-year average, a borrower with a $300,000 mortgage would pay roughly $1,665 a month. That's $383 more per month than just the end of last year. So the question being when are we going to see some softening of these prices?

ROGERS HEALY: Well, I think it goes back to the rental rates. I think that the average rent right now for a two-bedroom across the country is probably closer to $1,900 a month. So on paper, if somebody can afford a down payment, that's a good deal. Even though it's 300 and some odd dollars more expensive, you're building equity. And I think that right now, if average appreciation across the country is say 3% per year, you're buying into money.

So I do think we're going to see a continued not hockey stick like we saw the last 2 1/2 years, but it's going to still be kind of a relative appreciation and people that are still missing out, believe it or not, which means a year from now, two years from now, we're going to have those same people coming back trying to get in something.

- Now, we did see that someone who made a move to Dallas, made a move actually with you, Shaquille O'Neal. Talk about what you're seeing with some of these high net worth people. Like, what are they looking for, and what is that experience like as they have now coming to Dallas, and what is it that they're coming to Dallas for?

ROGERS HEALY: I think the short answer is opportunity. And you know, obviously, our firm has represented a lot of big names, most recently Shaquille O'Neal, like you said. And I think that once people get over the fact that Dallas doesn't have mountains, it doesn't have water, it makes sense. And Dallas compared, to a Chicago, an LA, a New York, an Atlanta, a Miami, or a Vegas, it's a great deal on paper, and it's also centrally located. So we've always had people that are in the pro sports world live here that have no direct connection to Dallas or Texas, but Shaq actually is a native Texan.

And so maybe it just felt like it was the right time. But yeah, you know, it feels like Dallas, all of a sudden, is this next boomtown, and everybody wants to be here. And I get a kick out of it because when you come to visit, you better have friends, or family, or a concert, or a bar to go to because that's our sales pitch. But I think people have appreciated the fact that it's booming and there's opportunity to grow all four ways. And athletes love the controlled climate and love that it's centrally located.

- I'm checking out the stats on the Shaq home, five bedroom, five baths, 5,300 square feet. I was surprised it was actually relatively modest for a guy worth $400 million. What's the big fella looking for, just high ceilings, high doorways?

ROGERS HEALY: Yeah, you know, and I don't know if it's appropriate to get into the details of that, but I'll tell you that people that are worth $400 million are worth $400 million for a reason, and it's probably because they know how to spend and invest their money. So I hope people are saying that about me one day, be like that guy without a mustache, you know, he's got $400 million, and he only spent $2 million on his weekend home. But you know, I think that it all makes sense.

But if I was seven-foot tall, I think ceiling heights would make a really big difference.

- And I want to ask you another thing that has a lot of high ceilings, commercial real estate, things like warehouses. What are you seeing in terms of commercial real estate, and what are some of the specific sectors that are really jumping ahead of the curve?

ROGERS HEALY: Yeah, so in my experience, commercial real estate trends usually are about two to three years behind residential. And so what's happened, even in the last few months alone, is we've seen office space booming, especially in cities like Dallas. And people that are kind of tired of working from home, or they need more space to collaborate, they need more office space. And I think what we saw happen in COVID, the trends for residential, where people didn't want big, open office environments, that's kind of coming back to commercial, as well.

And on top of that, too, the industrial space, they literally cannot build it fast enough. And you can think about companies like Amazon that need a million square feet per warehouse. There's also companies that need 30,000 and 50,000 square feet. So those markets continue to boom all across the country, especially in the cities that are kind of forever towns, like New York, Dallas, LA, Houston, et cetera. So yeah, I think we've got a solid multi-year run for commercial real estate being at a peak.

- It certainly sounds like you're going to have your hands full. Always good to see you. Rogers Healey there, the Rogers Healey Company's owner and CEO. Thank you.