Real Estate Radio with Matt & Jim – 2019 Edition

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Talking about the Charlottesville – Albemarle real estate market with Matt Hodges & Rick Moore has become an annual tradition, and is a great way for Matt and me to start the year. We each research and prepare for way more than we are able to get through.

This year, as always, we covered an awful lot of ground in a fast 60 minutes, and candidly, it’s a great conversation with information and insight for buyers and sellers in the Charlottesville Albemarle area.

Listen to the Podcast here.

Some of the topics covered

Matt Hodges’ contact information. Jim Duncan’s contact information.

I’m really not that serious.

Transcript of the radio show

*disclosure that I’ve skimmed this transcript, but haven’t read every word.

Speaker 1: Now stay tuned for the Sunday Morning Wake-Up Call on 94.7 WPVC Charlottesville. The Wake-Up Call is brought to you by Tiger Fuel and the Markets of Tiger Fuel. Now here’s your host, Rick Moore.

Rick: Good morning, everybody. Thanks so much for being here on Sunday at 11 o’clock. I’m Rick Moore. That’s me. That’s who I am. I’m the host of the Sunday Morning Wake-Up Call. I’m joined on this Sunday morning with my guest, Matt Hodges.

Matt: Good morning.

Rick: [crosstalk 00:00:49] Presidential Bank Mortgage. They let you out.

Matt: Only on weekends.

Rick: Only on weekends?

Matt: But I still work.

Rick: A suit and tie kind of dude.

Matt: No. T-shirt, sweatshirt.

Rick: Only on weekends.

Matt: We’ll see.

Rick: Jim Duncan. Nest Realty.

Jim: Morning. How are you?

Rick: I’m wonderful because I got Jim Duncan and Matt Hodges here with me to talk local economy, real estate, what to do about it, and what’s done to us. Jim Duncan, you can also read about him at realcenterda.com.

Jim: Yes, sir.

Rick: How long have you been writing that blog?

Jim: I started that in January 2005, I think, so a long time. A really, really long time.

Rick: 14 years.

Jim: 14 years.

Rick: Because we’re now in …

Jim: ’19.

Rick: … 2019. Thank you to the two of you for being here. This is about 14 times that you’ve probably been on this program.

Jim: It’s a fun tradition.

Matt: Enjoyable every time.

Rick: We are going to talk about real estate and local economy and some other topics that sort of fall into those two things. I do want to thank the two of them. Jim Duncan again, Nest Realty, a local realtor, among other things. That’s sort of the top of the list. Matt Hodges, a mortgage banker from Presidential Bank Mortgage. Rick Moore. I have so many talents I can’t stop and won’t select here at WPVC, the progressive voice of Charlottesville.

Rick: Let’s start. The government shutdown has been in the news since, well, it goes back to before December, but it started in December, went on for 35 days.

Matt: Way too long I think is the correct answer.

Rick: Then finished, but only with the threat of starting up again another government shutdown starting 21 days later. Here we are. Some questions that I have for the two of you are how it had an effect on real estate and the local economy. I’ll be specific. How did the government shutdown have an effect on some real estate purchases and mortgage issues in terms of applications?

Matt: Sure. I can give you some detail on that. I think there’s also the psychological issue of the shutdown. Jim probably will discuss a little bit about that. The only real direct effect of loans not being able to close were USDA rural development loans. Those are loans that are underwritten a second time, first by the bank’s underwriter and then secondarily by the USDA. Unless those loans had conditional approval, they could not close. A very real direct effect. Generally rural areas, so not the city of Charlottesville, but most of the county of Albemarle and surrounding counties were affected during the shutdown timeframe.

Matt: Outside of that, there were some tax transcripts that were not being processed at all initially and then slowly. Mortgage Banker Association lobbied the Treasury pretty hard and got the Treasury to assign employees to start processing the tax transcripts again. We were caught in between in at least one of our deals and we could not get that back before closing. We made the election corporately to allow that loan to close knowing that the risk was very minimal and that we would hold the loan until such time as we could get the transcript to then sell it to the lender. The effect there, some lenders might have had challenges. We did not, but that was only because we were willing to take the slight risk at allowing a loan to close.

Rick: Jim, what about actual buying. Somebody might say, “It’s a slow time of year anyway.” I don’t know if that’s true or not. That’s a pure assumption on my part. What about home purchasing in terms of a psychological effect for someone actually house hunting, in terms of the government shutdown?

Jim: Yeah. I think I didn’t personally through my lens see anybody who was directly impacted by it as far they weren’t able to get a closing to happen or they weren’t able to make an offer on a house. I did have numerous conversations from people who were concerned and aware of the shutdown and they were scared, if you will, about the impacts of the shutdown. It’s something that, through the shutdown, there was very, okay, not very little … There was no clarity as to what the future path looked like. That lack of clarity and lack of confidence, frankly, in our society and our economy led to a lot of fear. People didn’t make or not make decisions because of that, but they were expressing concern about what was going to happen because it’s an unknown. Anytime you have fear and ignorance and doubt thrown into an economy, bad things will happen.

Rick: Were there any areas other than, Matt … Again, Matt Hodges from Presidential Bank Mortgage, Jim Duncan from Nest Realty, as we talk about real estate and our area economy, currently on the government shutdown effects. There are parts of the government, whether they’re paying out, whether they’re accepting money, whether they’re doing paperwork … I come from an area … I was originally born or lived my early life down on the Chesapeake Bay. Everyone down there has to have flood insurance, so you have to fill out your paperwork, submit your paperwork for approval. Those parts of the government were shut down. If you buy a house and then … Again, I’m making some assumptions here … you’re ready to go and you submit this paperwork, and now you’re waiting and you’re waiting and you’re waiting. How would something like that play a role into your new home purchase?

Matt: We didn’t see that issue whatsoever here locally. Partially because in the Charlottesville MSA, the Metropolitan Statistical Area, there’s just not that many properties that fall into flood zones. The codes don’t allow building in them. Yet, there are some grandfathered pieces. From what we understand, in those instances the flood authorization is good through May. We did not understand that there would be any delays in issuing flood insurance during the government shutdown.

Rick: What about other similar types of paperwork needing approval from the government going in?

Matt: Sure. Yeah, Social Security Administration, we require a verification of bars, prove who they are. That is a check through the Social Security Administration. We did not have problems with that either.

Matt: Other challenges that could have existed or did exist with some people, Fanny Mae and Freddy Mac both put an overlay on top of any furloughed workers. They allowed them to close, but with two additional months of reserves. Sometimes you don’t have any reserves required, that is money left in the bank after closing. They make sure you can make future mortgage payments. For furloughed workers specifically, the rule was add two months of mortgage payment, make sure they still had that in the bank just in case the shutdown lasted longer and paychecks weren’t coming in.

Rick: What about troubles with tax transcripts?

Matt: The tax transcripts, as I mentioned earlier, were slow to get going after they became authorized to start again. The Mortgage Banker Association lobbied the Treasury to get those re-instituted, but there was a backlog. There were weeks’ worth of requests that had been put in the system, so there was definitely a delay getting transcripts back.

Jim: I’m going to touch on that from a slightly different angle, back to the uncertainty that was in the market. I’m sitting here and I look for NAR, National Association of Realtors, flood insurance shutdown 2018 on Google. Half of the headlines are about how FEMA shut down the issuance of flood insurance, and the other half are about how that shutdown was reversed. Even though I know what I’m looking for, I can’t quickly determine whether there’s a path of confidence going forward. That uncertainty, I think, from the shutdown had I would say as great of an impact in our market, if not more so, than the actual impact of furloughed workers. Because people, they hear headlines and they hear that things are going wrong and they don’t take the time or have the time to seek out whether that’s an accurate headline.

Jim: I think the uncertainty, I think, was a damaging thing to a certain degree for our market. Luckily, we’re through it for the next week and a half, something like that, until the next shutdown might come. I think the short story is don’t shut down the daggone government and let us do what we need to do.

Rick: We talk about the people who didn’t go to work and didn’t get a paycheck and will get back pay. Then there’s often a news article or a conversation about the contracted employees who won’t get their loss back. How about the two of you in your business? Were there any losses from that? Did you not sell a house? Did you not have anyone come to you at Presidential Mortgage that you can think of or are pretty sure about, any loss from this government shutdown?

Matt: It’s a good question. I think geographically that question would be very appropriate in Washington DC’s area because of the vast number of contractors that are associated with government work. They will never be repaid. They’ll never be made whole without that company, those employees working tons of over time to do more work-

Rick: We have NGIC here.

Matt: But they’re a vital component. They were not furloughed. They were paid. They went to work. So did the contractors that worked with them. I didn’t see it personally. I didn’t see any slowdown of government employees or government related contractors in my business.

Rick: Okay.

Jim: Same here. I think that, again through my lens of representing my buyers and sellers and talking to agents within Nest, I didn’t see or hear of any instances locally about how the shutdown impacted people. Other than the fear. Other than the headlines of this bad thing is happening somewhere else. I think the stuff I know about this is just reading national headlines about the contractors who did not get back pay or will not get back pay and the ancillary, dry cleaners, restaurants, the economy that depends on those people coming to work was impacted. Again, it’s something, it’s certainly an impact nationally. I didn’t see it here in the Charlottesville Albemarle area in any way.

Matt: The Library of Congress facility in Culpeper definitely was affected. I did have a client that closed prior to the shutdown. She had sufficient reserves fortunately for herself.

Rick: Again, our guests today, Matt Hodges from Presidential Bank Mortgage, Jim Duncan from Nest Realty, as we talk about real estate, our local economy. I mentioned during this conversation about government shutdown effects an assumption about fewer homes being shown and sold. What is the cold weather effect on real estate sales and showings in …

Jim: I think fairly minimal, mainly because if a buyer wants to see a house on Tuesday morning and it’s 12 degrees, they are going to want to see that house. Seasonally, the trend is that the new inventory comes on the market February, March, April, and peaks in May. Contracts lag 30, 45 days in closing subsequently lapse another 35, 45 days beyond that. I’ve been doing this for 18 years now. Throughout every weather extreme that we’ve had, I’ve been showing houses. I think that it’s something that certainly might have an impact or my perception of having an impact, but if buyers want to see a house they’re going to see a house. Sellers, if they want to have their house shown and sold, they’re going to be accommodating and say, “Sure, come on in. My three kids are at home, but we’ll go to the sun room or we’ll go to the basement or we’ll go for a walk,” to make sure their house is shown.

Matt: Jim referenced it. It’s the amount of inventory that’s on the market that starts coming on in February, March, April. Buyers right now exist. I have probably more buyers at this moment historically than in February’s in the past, but finding the right inventory is a challenge right now.

Jim: Yeah. I’ve seen this locally and I’ve read national headlines. I just got back from a conference in New York City last week. There are a large number of first time home buyers who have been … They call it the pent up demand … that want to buy homes. They’ve been saving for three, five, seven, ten years and they’re ready to make the buying decision. Finding a house that’s going to fit is an extraordinarily difficult challenge for a lot of people. A lot of first time home buyers, they finally have the savings and they have the credit score and they have the package of stuff that Matt requires as a lender, but finding the right inventory where they can move in tomorrow and maybe paint is a challenge. It’s going to be an interesting 2019 to see how many homes come on the market that are able to find buyers.

Rick: Again, our guests today, Jim Duncan, Nest Realty, Matt Hodges, Presidential Bank Mortgage. We’re going to talk real estate, area economy. The 2018 recap, let’s do that. I was curious to find out how 2018 is different if any ways from other years and what needs to be different or the expectations of 2019 from the previous year. Though, we have about three minutes before we need to take our break and thank our underwriters. Let’s do what we can for the recap of 2018.

Jim: I think that what we saw last year was that really it’s been very similar to the previous years, is that the homes that come on the market in great condition, great location, and the right price tend to move fairly quickly. I’ve seen a number of homes in ’19 that have gone under contract in under three days, which is kind of remarkable for this time of year. We’re up a little bit year over year. 2018 was a good, busy year for our market. I think the first three quarters were very good with sales increasing, price points increasing across the board, throughout the Charlottesville MSA. What we did see in the last three quarters is sales were down about ten percent year over year. I think that it was a combination … Looking at that last three months, it’s going to be interesting to see what January, February, March of 2019 brings to see if that downward trend continues.

Matt: We definitely had the spike in interest rates that occurred around October. That psychologically took a lot of people out of the marketplace. Not financially, they still qualified. But when you hit the number five percent, it seems silly even saying that, but five percent psychologically is a high number now. I’ve been originating loans for 20 years and I originated them over a percent. Historically, these are low, but that five percent barrier can seem daunting.

Matt: A Freddie Mac economist recently stated that as long as we’re below five and a quarter, we’re going to have growth year over year.

Jim: Yeah. Historically, rates are, they’re stupid low. My mom was selling real estate in the early ’80s at 18%. My first loans, I tell my clients, 20 something years ago, was eight and an eighth. Five percent, it’s a high number relatively, but it’s historically quite low. For those buyers who are looking at three and a quarter, three and a half, and their peers are buying at that interest rate, and they’re looking at four and a half, that can feel really high. One of our many roles is to educate them and say, in context four and a half is a pretty darn good rate. Whatever that is, in my mind under seven … It’s also not something that … In my opinion, if an eighth of a point or a quarter a point is the determining factor as to whether you can buy a home or not, you might want to pull back a little bit and save a little bit more money. Again, I look at it as a longterm buying decision that it shouldn’t be stretching you to the greatest depths of your finances. An eighth of a point should be a sustainable increase in interest rate to keep you moving forward.

Rick: Again, our guests today, Jim Duncan and Matt Hodges. We’re going to take our break and be right back. I’ve got an interesting question here about smart security practices on a blog that I saw on Jim’s website on realcentralva.com. Don’t go anywhere.

Rick: All right. We’re back in action. Thanks to our underwriters all the time here at WPVC, the progressive voice of Charlottesville. I’m Rick Moore. Sunday Morning Wake-Up call. Jim Nest, Matt Hodges also calling you here to wake up and talk real estate or at least listen.

Rick: Gentlemen, thanks for joining me. Jim, this question goes out to you. I was looking on your blog, realcentralva.com. You had done a piece on smart security practices because of … I guess it started about a smart door bell.

Jim: Right.

Rick: Talk for a minute or two about that.

Jim: With the preface that I’m not a security researcher and I don’t know what I’m talking about … I’m seeing more and more of the houses that I’m representing sellers and buyers who are buying these homes are buying homes with smart devices that are either in the house when we’re showing, like an Alexa or a Google Home or I think Apple’s Home Pod is probably going to be defunct soon enough, that you have those smart devices that are listening to you in the house, but you also are starting to have smart thermostats and smart doorbells and baby monitors and Nest thermostats and Nest … Not Nest Realty. Nest that is now owned by Google, which is also scary. Nest smoke detectors and motion … You have smart homes that are only as smart as the people who are operating them. A lot of these devices don’t have security built into them. People don’t take the time to change the password when they move into a new house.

Jim: If I buy Matt’s house and he’s got a Nest thermostat, he doesn’t change the password, I could still get into that and make it 40 degrees or 90 degrees or whatever. You can read the stories. Everyday, every week, new stories come out about how a Ring doorbell was hacked and a hacker was yelling at the owner of the house. I saw one last week that somebody’s smart device was … God, I forget what it was. A family was at home, and somebody hacked into their smart device, whatever that was, and told them to take cover because there was a nuclear threat from North Korea.

Jim: It’s something I think is incumbent on everybody to, when they move into a house, to change the passwords and turn on two factor authentication. I’m in the practice of representing buyers and sellers. There’s no training necessarily that’s out there that says also when you buy a house here are the things you need to do. For my clients, I put together a … Actually, the National Association of Realtors has a sort of outdated smart home checklist for people to do when they move into a house. I provide that to my buyers and for my sellers to change the passwords.

Jim: I think I said on my Twitter the other day, about how tech enthusiasts who say, “Everything in my house is smart. It’s great, it’s wonderful. Everything is connected. I can Bluetooth this and [inaudible 00:23:56] to wifi on this.” Whereas, I’m quoting here, the programmers and engineers say, “The most recent piece of technology I own is a printer from 2004 and I keep a loaded gun ready to shoot it if it ever makes an unexpected noise.”

Jim: I saw a story the other day about the smart locks. I don’t necessarily know if I want my front door lock to be hackable from somebody driving by. Locally, I heard stories of people who were keeping their car keys by the front door. This has happened anecdotally locally. People were going, bad guys, if you will, were going down the street trying to open car doors because they were able to access the car door because the Bluetooth, the car key fab was close enough to the front door where they could open it. Again, I’m not a troglodyte, I’m not a fear monger, but there’s sometimes when technology is not necessarily applicable to a comfortable daily life.

Jim: Yeah. I think that the smart locks, smart thermostats, I like being able personally to physically lock my door. If someone wants to kick in my door, more power to them. Please, don’t. More comfortable to live a daily life where I’m not beholden to whatever new security update is out there. I would encourage people to do their Googling of internet of things and look at the security of the device they’re putting in their houses. I don’t know if I need a … I saw something the other day, a new fridge has come out where if you don’t close the door it will text you and say the door is not closed.

Rick: Shouldn’t it just shut itself.

Jim: Or it could just shut itself! Yeah, technology for the sake of technology I think is not necessarily the best thing in the whole wide world.

Rick: Again, Jim Duncan. You can read his blogs on realcentralva.com.

Rick: Let’s talk for a few minutes about new construction here in the central Virginia area. WPVC is in Seminole Square. Some information, I believe, I don’t know if it first came out in Charlottesville Tomorrow, but I read about it in Charlottesville Tomorrow. There is a proposal for Seminole Square about a very large apartment building area in Seminole Square, five large apartment buildings, I believe.

Jim: 11.

Rick: 11.

Jim: 11. Yeah. I think it’s kind of awesome to have that kind of infield development come into the heart of the city that’s going to hopefully bring more people together, more pedestrian oriented stuff, more green space, where you don’t have people driving from out of the area to get to their jobs at the local businesses. I think there’s going to be … I don’t know whether it’s going to meet the definition of affordable housing, in air quotes, as far as the median income ratios. Certainly, if you drop in a couple hundred units it’s going to be market driven affordability. I think that that’s the sort of thing that makes a lot more sense than having a new big box store or something like that.

Jim: I read the same story in Charlottesville Tomorrow, which is such a phenomenal resource. It seems like, at least on the surface in the reporting, is that there seem to be predominantly accolades for this type of project, which I think is a good thing. We need more affordable housing. We need more dense development. We need more mixed use to keep people in the heart of the city. To me, it seems almost like a no brainer to bring these sorts of things in and for the city to encourage them, in the right place. Because God knows we don’t need more parking and more traffic.

Rick: Matt, I’ll ask you about affordable housing in this conversation in just a moment. I’m curious for the both of you about infrastructure. 11 buildings seems kind of large. Of course, it could be a building that’s three stories high, and I don’t remember whether it was three stories or ten stories.

Jim: I would be shocked if it were ten.

Rick: Right. This would be in the county.

Jim: This stuff is in the city.

Rick: Is it on the city side of the …

Jim: Yeah. Stonefield, where we’re sitting, Stonefield is on the right and Seminole Square is on the left.

Rick: It’s on the city side of that …

Jim: Correct.

Rick: … that four square interchange.

Jim: Correct.

Rick: As far as infrastructure goes, are we putting in buildings before roads or people first before … Which comes first, the buildings and the people or the roads before the buildings?

Jim: Uh huh, yeah.

Rick: Because that’s a lot.

Jim: We don’t plan like that, Rick.

Rick: Which do you see …

Jim: We see …

Rick: As the realtors and the mortgage bankers, especially in some of these not selling the individual home with its one and a half, two acres, but in some of these more suburban group settings, which do you see?

Jim: You see the buildings come in first. Now, actually I noticed yesterday. I was showing a house on the southeast part of town near Wegmans and I was driving down, I think, Sunset Avenue. They’ve got a bunch of new homes in there. It was interesting. That used to be a narrow two lane road. Now it’s sided with new construction on both sides. You have paths on either side. You have sidewalks and paths. I think that as new construction goes, it’s building the pedestrian bike infrastructure. I think that bringing dense development to the city of Charlottesville is going to keep people from having to drive if they make that election.

Jim: Yeah, there are no mechanisms in place that make new construction commensurate with infrastructure, which I can make both sides of that argument, pro and con. I think that where we are right now, they’re building homes and then the infrastructure comes later, whenever that is, when we have a critical event is when they start that infrastructure planning.

Jim: I go back to the serenity prayer for a lot of things. I can’t control it. I can’t have any impact on it, so you accept it for what it is and move forward. Through the lens of being in New York City last week, our traffic is not that bad. Northern Virginia people come down here and they’re like, “You all are complaining about this?” A friend of mine years ago said that traffic is a good thing because it’s indicative of a thriving town and economy. I think that’s a profoundly positive spin on traffic, but you know what, I’ll take it because the alternative is to lament the sitting in traffic. Or just don’t go to Hydraulic Road at 5:30 on a Friday because that’s just dumb.

Rick: Matt, I’m curious as to your take on this.

Matt: Yeah. I don’t come from the school of taking clients out and driving the roads like Jim does. It’s not part of what a mortgage lender does. I’m encouraged, at least within the city, of the road infrastructure that has been built up right here. Right next to the radio station, Hillsdale has gone in there with the extension. It’s become a much more user-friendly way to move around …

Rick: Yes, yes, it has.

Matt: … this area. I think that the roads actually would support the development of these apartments. From what I recall, the bigger challenge may be the sewer and the water system, given the leaks that exist and the stress on the system from a development like that, but I’m no engineer so I don’t know those concerns. I just recall that we had them. Maybe they haven’t been front of mind recently.

Jim: Adding onto that, I think that when you have this type of dense development that’s close in, when I’m looking at buyers … We talked about this a few years ago, I forget the term for it, but the mortgage that took into account the total cost of ownership. When I’m counseling buyers to look at where they’re buying, we look at not just the house, three bedrooms, two and a half baths, $450,000, or whatever, but we also look at the total cost of ownership, which is how much does the house cost to heat and cool, where is their job, where is their grocery store. If you’re working in downtown Charlottesville, you might have one car so you’re spending less on car payment, insurance, gas, maintenance. One car, you’re driving less, you’re taking the bus, you’re riding a bike hopefully or walking. Your total cost of ownership is going to be less.

Jim: I think it’s something if you’re looking at spending X per month on your housing expenses, if you can save 300 bucks a month, 400 bucks a month or whatever that is from not having a car payment and not paying for gas, you’re going to live theoretically a better lifestyle because you’re going to be able to either afford a better place or you’d be able to go out to dinner more or save more money, which is somewhat un-American. I think it allows people more flexibility and more options to live better lives if they’re living closer to those things that are important to them.

Rick: The phrase … Again, we are here today with Matt Hodges from Presidential Bank Mortgage and Jim Duncan from Nest Realty. You can also check out his blog, realcentralva.com, as we talk about real estate and local area economy.

Rick: The phrase affordable housing came up when we were talking about the new area. I don’t want to overlook other new construction, but specifically the Seminole Square proposal that popped up in the news … What is the definition of affordable housing and is it or would it be considered different in the Charlottesville Albemarle area than it might be elsewhere? My understanding from growing up, when I started paying attention maybe in my 20s, was don’t spend more than 30% or one third of your income on housing. That seems somewhat near impossible in the Charlottesville area.

Matt: Indeed. The way we look at underwriting is on a debt to income ratio. Jim actually referenced the type of loan that takes into account all those other things, utilities, maintenance, childcare, and that’s the VA. The Veterans Administration does a really good job of getting down to residual income. From the perspective of most borrowers out there who are doing Freddie Mac, Fanny May, FHA loans, we’re looking at a debt to income ratio that should not exceed, believe it or not, 50% of their gross income. Do you take home gross income, Rick?

Rick: Do I take home gross income?

Matt: Yeah.

Rick: You mean do I work?

Matt: No, no, no. When you get your paycheck, is it the gross amount that your employer has said that you are going to earn? No, it’s net. It’s after taxes. Yet, Fanny May will allow you to borrow up to 50% of your gross.

Rick: Which is insane.

Matt: Which is insane. Affordability, you’ll get different answers for what affordability means. If you’re looking at programs that are either zero down or low down payment, you’re generally going to have restrictions that will cap you out, in our area, so the Charlottesville MSA, at about 89, 90,000 dollars. Each program is slightly different, but it’s going to be right in that range. We’re going to have high limits of 484, 354 loan size. That’s a conforming limit. If you take that first time home buyer or that affordability and place it in DC, you’re going to have a much, much higher loan size that’s possible and a much higher cap on what your income can be to still qualify for those. It is geographically based significantly.

Rick: We’re talking about new construction. I stuck us on the Seminole Square. Are there other areas that we need to pay attention to or I might not have allowed us to discuss?

Jim: From a new construction perspective or …

Rick: Yeah.

Jim: … affordability. I think new construction in our area, it’s very difficult to build anything new for under 400, frankly. There are some things that are along the Avon Street corridor. There are new construction town homes for the mid to high three’s. Getting a house, a new construction home, for $200,000, that’s just not a thing that we have. I think it’s something that … I’ve ran some quick numbers. Last year, in Charlottesville Albemarle, there were about 2500 homes that were sold in our area, and 550 of those were new construction. A significant piece of that was new, but of those 563 about 200 were under $400,000. I didn’t break it down further. That’s a reasonable component of it, but I’ll bet you when I dig into those numbers most of those are going to be 350, 360, 375.

Jim: I think it’s something that … I remember when I first started practicing, there was another radio show and they were talking about affordable housing 15 years ago. Somebody said, “What about affordable housing?” The host said, “Well, they’re obviously affordable to somebody,” which is not the best answer in the world, but it’s also an honest answer. I think that you look at the city of Charlottesville and the county of Albemarle, though, for the full spectrum of our economy, housing is a challenge and it has been for my entire career, to find affordable housing that’s livable, well located, and allows people to live better lives.

Rick: Our guests today, Jim Duncan, Matt Hodges, as we talk about real estate and the local economy. I’m always fascinated when these guys are on the show. Hang tight. Just 20 more minutes and you don’t want to miss it.

Rick: All right. Back here on Sunday Morning Wake-Up Call. Thanks for being with us today. Guys, I want to know how has cable TV and HGTV changed, ruined … You said ruined?

Jim: Ruined.

Rick: Ruined real estate?

Jim: HGTV, I watch it far, far less than I used to, mainly because I got rid of cable. It sets unrealistic expectations for people who are out there. I’ve not seen a project that one of my clients has done that has come in under budget in under 27 minutes and everybody is happy. Look, owning a home, renovating a home is work sometimes. It’s not cut out for everybody. I think HGTV is something that, it’s fun to watch as long as you watch it with the right attitude of this is made for TV, it’s not real, and it’s fun to watch, but I’m never going to do any of that stuff. I’ve got clients that look at it and they get paint color ideas and knobs ideas and stuff like that, but from a reno perspective it ain’t reality.

Rick: How does wanting to renovate a house affect what goes on in terms of mortgage?

Matt: Yeah, it’s a great question. Jim and I worked with a client this past year who wasn’t ready to do the renovation yet. He just simply wanted to acquire the house. We took his situation, we applied a proper mortgage to it, in anticipation that he is now actively working to architectural plans and a builder in order to do that renovation. We’re going to do that renovation loan down the line next couple months.

Matt: It can also be a renovation purchase, and that’s sort of an important factor. If you allow enough time for closing, maybe a 60 day window, and you get together your plan specs, your builder, we can actually close on a house with an anticipated future value based on what the plan specs, the contract from the builder calls for.

Matt: We are looking at that quite often with clients these days. Most of the time, it’s being done subsequent to the closing, but there are some purchase renovations that are out there right now.

Rick: All right. Let’s talk about the spring market because we talked about 2018. Let’s talk about 2019. What happens in the spring in terms of being prepared? When do you start? How does it take place?

Jim: It starts now. I’m going to start, actually preface this with how important I think it is, how important it is for buyers and sellers entering this market to find the right team, the right representation.

Rick: Why do you need a team?

Jim: Because for a buyer you need the right buyer’s agent, you need the right lender, the right inspector, the right attorney, the right everything. You need a team of people to help you through this process. I’ve talked to a number of people over this year and over the years who they moved to the area or they start the process and they work with the first person they meet, which is not, in my opinion, not the right approach.

Rick: Right. You look in the Yellow Pages and find A.

Jim: Exactly. You go to the library, find the Yellow Pages, because they don’t exist anymore. Do they? You find the right-

Rick: Alderman. It starts with A.

Jim: Exactly. You have to find the right person to help you. It really is a matter of … I got an email from someone the other day saying, “I wanted to talk to you about representation.” I said, “Okay, great. Let’s have a conversation and see if we’re going to be a good fit,” because it’s not always … When it’s warmer, I’m wearing Birkenstocks and shorts and a T-shirt. I’m a much more casual person, even though I take what I do extremely serious, and everybody who works with me knows this, I’m casual in my approach. That’s not going to be a good fit for the person who wants a realtor in a suit and tie.

Jim: The right lender. I think that finding the right lender is going to have, you’re going to be able to trust through the process. I’ve worked with Matt for almost 15 years, something like that.

Matt: Right, but I’m not always the right fit.

Jim: Right.

Matt: I have a certain way that I do things. I do listen to my clients and get their feedback, but sometimes we just rub wrong and I’m not the right fit. That’s okay. I’ve been doing this for 20 years. If I ever got my feelings hurt because somebody didn’t select me, I would have gotten out of the business a long time ago.

Jim: One of my buyer clients may or may not be listening to this today to interview.

Matt: All right.

Jim: You hear this dialogue and they might say, “Matt is great. I want to work with him,” or, “He’s not the right fit for me.” I think you don’t want to enter that process with the wrong realtor and the wrong lender only to find out in two and a half months that you don’t feel good about it. If you’re spending hundreds of thousands of dollars, you want to feel good about the people with whom you’re associating.

Jim: With that preface, now is the time to start that conversation with agents, whether buying or selling, and lenders and everybody else to get ready because the market in Charlottesville Albemarle, it picks up now. Mid to late February is when new listings start to really hit the market because everything is tied to the school year in our market. They want to close end of May, early June, and then the second wave will be closing before the start of the school year. Now is the time to start having that process and start evaluating neighborhoods and where you want to live and where you don’t want to live.

Rick: Here’s two questions related to this. First, who makes up the team? Because I think I cut you off there.

Jim: No. The team that I help my clients assemble … For buyers, it’s going to be … Real quick, I’m going to write a story about this, so all the show notes will be on realcentralva.com. It’d be the buyer’s agent, the lender, the attorney, the home inspector, various home inspectors if you’re doing a septic inspection or snaking a line for sewer. For sellers, it’s going to be the agent, stager, photographer, cleaners, handymen, my assistant who is phenomenal. That’s part of the package that professionals bring, is here are the people who are going to help you. We can all Google, we can all go to Nextdoor, if you will, and say, “Who’s good?” Or you can hire somebody who’s going to say, “I know who’s good and here’s who you should trust.”

Jim: I think it’s also important for … Again, this conference someone was saying last week, that everybody in the process, the lender, the realtor, the attorney, they all want to be the hub. It’s an ego thing. I think it’s important to have the right thing who understands that I don’t really care about my ego, I don’t care if I’m in charge. Matt doesn’t care. We want what’s right for the client. It’s finding the right assemblage of people who are going to work together collaboratively in the client’s best interest. Sometimes, as the agent, lender, or whomever, through that process, being in a position to say, “I know that you really want this house, but this is not the house for you. It’s time to walk away.” I never give that direct advice. I don’t say, “You need to terminate.” The way I practice is I ask questions of the client and let them come to that determination.

Jim: It goes back to finding the right team to help you through the cliché, which is true, the single most expensive financial transaction people ever make, you want to make sure you’re trusting the people with whom you’re associating. Because it’s a big thing. I’m fond of saying to my clients, the decisions that you make, whether to buy this house or to walk away or sell or stay, is going to impact the rest of their lives. I’ve been doing this long enough, and Matt has too, where we’ve seen good and bad decisions come to fruition. We use our collective experience to help advise people to ideally make a great decision with which they’re going to be comfortable in five, seven, ten, 30 years.

Rick: Question two for the both of you is … I’ve lived in Charlottesville a long time. One of the people who’ve fallen into the Charlottesville black hole. You come to UVA and then you stay. I don’t think it matters whether you’re new to town or have stayed here for a significant amount of time and are moving. If you want to move, you think you know the area of town you want to move to, if you’re new to town you’re not sure … How do you find out which neighborhood is for you? You come to town and you say, “I’m moving here and I need the best school”? Where do you go to find that information? I’m here to town and I want the area that’s easiest to get to my job. Where do you gather this information?

Jim: Yeah. I’ve got a client who right now is looking, I think we’re going to be March, April, actually coming down from New York to look at properties. It is driven on the preschool for their child. That’s where they’re looking to purchase in the county.

Rick: Right, and that will last for three years? Two years?

Jim: In theory, the preschool leads to elementary, etc.

Rick: Right.

Jim: But you’re right.

Rick: The school, the elementary school may not be as good as the middle school or … Yes, the school system is obviously a huge percentage of the choices that are made.

Matt: We have to be careful there because the realtor can give factual data about school systems, but they can’t direct. They can’t give an opinion on which school district would be best. It’s unethical. Correct?

Jim: Which is the best school … Thanks for the lead in, Matt.

Matt: Sure.

Jim: Which is the best school is such a subjective thing. If I say, “This is the best school,” it can be perceived as X, race, class, etc, which are protected classes. I ask questions of what does best mean to you and here are the places you can find that information. The Virginia Department of Education has a great resource about SOL scores if those matter to you … I think they’re silly … and number of weapons and drugs and fights. I think that a lot of my clients, my advice for those moving to Charlottesville, rent for a year, figure the town out, learn who your friends may be, and start … Most of my clients join, I don’t even know what they are, but they’re various moms groups, Facebook groups, Nextdoor groups, actual in real life groups where the moms and dads have these conversations about what best means to them and where their peers are sending their kids.

Jim: Again, best is relative. I had a client years ago that came to town, had been here for years, left for 20, and he came back and said, “I want to be in this school system.” We targeted that for about a month and a half. As I got to know them better and asking more and better targeted questions, he realized where we were looking was not where they needed to be, so they shifted to another part of the county. They’re extremely happy because that was a better school for their family. What is the best? It depends. It depends on who you are and what you’re looking for.

Jim: I think the short answer, rent for a year, ask a bunch of question, and become part of the community to figure out where you need or want to be.

Matt: Neither of us want a buyer to make a poor decision because they did that quickly. We’re both in this for the long haul. If it takes somebody a year, two years to find their right house, that’s okay. That means that they’ve made a good decision.

Jim: Yeah. Real quick on that. I work with buyers sometimes for two to three months before they decide to buy something, and some I work for four to five to six years. This is a longterm relationship that I build with my clients. It’s not a matter of hey, great to meet you, buy this house, or buy one of these three houses that you see on HGTV. It’s figuring out where you don’t want to be and where you do want to be. You take the time to make a significant life decision. It’s a heck of a lot harder to buy and sell in 18 months than it is to pick a new rental.

Speaker 1: 54 after the hour with our guests Jim Duncan and Matt Hodges. Jim is at Nest Realty. Matt at Presidential Bank Mortgage.

Speaker 1: Guys, anything special in Charlottesville, Albemarle, central Virginia that makes it easier or more difficult than other areas that people might … Whether that’s in Virginia or nationally … in buying a home? Whether that’s price, people, whatever, paperwork.

Jim: From my perspective, this is all I know so it’s fantastic. No, I think that I have clients that come to the area and they are shocked at our house prices. I also have clients who come in and say, “Holy cow, your houses are so cheap.” The process is different. Charlottesville, every real estate market is unique, so there are idiosyncrasies to our market that I do have clients that are surprised that at the closing table it’s just the buyer and their attorney and me and the lender. Some come and say, “What time do we all get together to close,” because in some locations buyer, seller, realtors, lenders, attorneys, they all go to the same table. There are local market customs that are different here. From my perspective, it’s all I know from a real estate [practition 00:55:01] perspective.

Matt: Yeah. In most areas, the attorney represents the contract, not the buyer or the seller, so it is unique here locally. In terms of our area and the demand on product, it is an ideal place to live. You mentioned UVA. Hey, you come to UVA, you never leave, because this area is beautiful. It’s got good schools. It has beautiful scenery. There is an inherent demand. There are companies that come here specifically because the owner of the company likes this area. We’ve got a high tech biomedical group that is building and building here locally, and that’s providing some fantastically high paying jobs. It’s quiet. It’s under the surface, but it’s been because individuals have decided to relocate here. This is the place that they want to be for their kids, for their employees.

Jim: You look at Willow Tree and the redevelopment that they’re doing downtown in Woolen Mills. That’s hundreds of people that are choosing to be in and stay in and move to Charlottesville. Cville Bio Hub, they’re doing remarkable work to help put in the infrastructure for new companies, existing companies to grow and also to have that lateral movement availability. That’s one of the challenges that we faced for years is that if you go and work for X firm and that’s not a good fit for you, you have to go to Charlotte or …

Matt: Raleigh-Durham.

Jim: … Raleigh-Durham or DC. Now we’ve building the infrastructure to say you go to this company and decide it’s not a good fit, you can move across the street, if you will, and go to that company. I think that we’re a growing economy. There’s a lot of good stuff that’s happening in our market that I think is going to hopefully bode well for the coming decades.

Rick: Matt, I’m going to probably finish up with you on this. When you guys come back, I think we’re going to end up talking about the interest rate. Tell us about the roller coaster interest rate we’ve had over the last 12 months and where we see it going next.

Matt: Yeah. The interest rate market, if we look back a year from now, it was four and a quarter, four and an eighth. It was very attractive. We climbed virtually the entire year. We peaked in October. There were interest rates that were best execution at five percent, which is crazy. It has since come back to the mid four’s, four and a half, four and five eighths. It really depended on the client. What has not affected us negatively is the Fed’s actions. There’s been this butting of heads between Jerome Powell, the Fed chair, and the White House. Stop increasing the short term lending rate. That really has not had a negative effect. It has provided the Fed’s guidance on unemployment and on inflation. That’s why they’re increasing. If we get into a situation where the economy is not doing well, they have room to cut the federal funds rate and to loosen up the economy some. That piece has not negatively affected our interest rates at all.

Matt: I am hopeful this year that we will maintain in that four range and not climb anywhere near five.

Rick: All right. There you go. Our guests today, Jim Duncan, Nest Realty, you can see his blog at realcentralva.com, Matt Hodges, Presidential Bank Mortgage. Gentlemen, thank you so much.

Matt: Thank you, Rick.

Jim: Thanks, Rick.

Rick: See you again soon.

Speaker 1: This has been the Sunday Morning Wake-Up Call on 94.7 WPVC, the progressive voice of Charlottesville. The Wake-Up Call is brought to you by Tiger Fuel and the Markets of Tiger Fuel. Strength is in their fuel. Engineering assistance is from [Mike Friend 00:58:47]. The Wake-Up Call is produced by Dan Gould. Show archives can be found at cvillepodcast.com. Be sure and join Rick next Sunday morning for another edition of the Wake-Up call, only on 94.7 WPVC.

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