 Well, good morning. Good afternoon. Good evening, whenever you're listening. This is Davisville on KDRT LP 95.7 FM in Davis, California We live at KDRT.org online. I am Bill Buchanan And I thank you for tuning in for the latest of our programs about different aspects of how the pandemic is affecting Davis And I should say today's program like others I've done this spring sounds different because I'm recording it through my computer and set it in our station's a wonderful studio My guest today is Steve Boschkin. He is a Davis mortgage and real estate broker who has a Degree in environmental design and urban planning from UC Davis He's been on this show several times in the 12 years. We've been doing it to talk about housing And that's the subject today the effect of the pandemic on housing in Davis at least so far And Steve is talking to us from his home office also over computer. So Steve, thank you for coming on to Davisville today absolutely So Most of the town's been sheltering in place for more than two months now. We're talking in late May The schools are closed. You see Davis classes are remote most college students have left town the economy's taken a hit Lots of unknown still but given all this What's the state of the housing market in Davis this spring? And I'm interested in rent as well as sales. Whatever you can tell us Sure So fortunately, I guess on our end. We were considered essential and have gone to the office every day and continued to work and But watching the the transformation over the last few months has been very interesting And it changes day by day The university Well, let me go back to, you know, let's say January There was a much different place in our world in January We were chugging along The market was looking like it was gonna be just a normal year With, you know, a couple percent appreciation and normal sales The university is still building at a furious pace The 5,000 new beds out on West campus that they have been Working on for a number of years And so we were from a rental standpoint There's also and sorry, there's another Several projects over the, you know, it's spattered throughout Davis that are underway a large one by the post office one by Wake Forest Another one on Olive Drive all of which we're going to be adding over the next year About 7,500 beds. I would guess to the Davis rental market So that was already something that we were kind of anticipating What we didn't anticipate obviously was the C-19 effects and on the university and how they were going to Handle being in session on campus versus the electronic Education that a lot of the kids are getting right now with the Shutdown most of the students that were here Are are locked into leases for Probably the better part of the summer You know, most of the leases in Davis are One-year leases and they tend to start Typically either at the end of our beginning of July or beginning of August depending on the cycle And they are and they're locked into those What is transpired is that the county and the state have put in a moratorium that landlords cannot foreclose or Sorry enough foreclose, but evict the tenants however Once the the ban is lifted the stay-at-home shelter-in-place Requirement is lifted then the Renters have up to six months to pay back any back rent Now that'll be very interesting to see how Landlords are going to collect on that because the longer it goes the larger that dollar amount goes or gets to And the reality is if they're not working and they can't pay the rent How are they going to pay their rent, you know back six months or more? but that's one of the things I've wondered about is is As far as you can tell our rent still being paid, you know surprisingly so we manage between HOA's and rental properties roughly two thousand single family or residential properties and We're finding that as well on the HOA side most everybody is able to make their payments For those on the rental side. We're finding that surprisingly A high number and I don't have exact statistics on this But I would say in the in the least 95% range people are making their payments You know the first month most people have Some reserves the second month that gets a little tighter But then the PPP programs and the unemployment program started to kick in in April And people were starting to get checked So we're finding that there's the very few at this point at least in Davis I can't say what's happening outside of Davis, but at least in Davis the majority of people are making their payments Are people signing leases for the fall because you know the the market is tight I guess anybody listening probably knows that but generally, you know, you you you can't get an apartment just any time you have to kind of get it at the right time of the cycle which means students are having to decide now and It's not clear what the UC is going to do in terms. They're gonna have hybrid. They're gonna have some online some in-person I guess right as we understand it the University and we've talked to several people that are you know close to the hierarchy at UCD and They're gonna do the they've announced already that they're gonna do the higher the hybrid kind of system however, it's our probably inside understanding that that hybrid is primarily going to be online and Only the science and laboratory type classes Are going to be on campus. Well, that's gonna change things Significantly at least for the undergrads So back to your question Our house rental or house leasing going and as you may or may not be aware This is the the time when all the leases get renewed starting in January February March For the following year what we're finding is that grad students lost students med students bets those students are all Signing their leases now because they expect to be on campus No matter what how campus opens for undergrads. It is expected that those Students will be on campus. What we are finding though on undergrads is that they are Not being informed as to how their specific classes are going to go and whether they need to be here and They are very hesitant to sign leases Now if the university is all of a sudden says well, we're gonna have you know 50% of your classes are going to be on campus Then we're gonna see a mad rush of all these students who have kind of hesitated to get into Their rentals for next year and try to kind of lock something down because at this point They don't have anything and the university has talked about even not doing guaranteed freshman housing Come the fall because in the past they have They have Stuck, you know three or four people into one dorm room well right now at least with the the c19 guidelines that the county is Recommending and the state's recommending Putting those that many people into one room who then go out into the community and then come back to be with each other Is just not a good recipe for staying healthy and so they're talking about Potentially taking all of those dorms and on campus housing down to one person per bedroom And I think that I heard that UCLA has already done that. Okay, so this really There's just a lot of uncertainty what I'm hearing with all this right I mean you've got at the start of it You were saying there's more supply that was coming on at the start of the year and so that would have increased capacity It sounds like uh, some students are fairly certain They're gonna they're gonna sign a lease power to the campuses But there's a lot of others who are waiting. Is this having any effect on rents themselves? well We're at the very very early stage of trying to figure out What is You know anticipated for next year because that changes daily We're seeing some landlords who are very Nervous about where the market is start to dump some of their prices for leasing Down not significantly but enough to try to get under the market and attract people You have you know others that are just holding tight and are waiting to see what's going to happen because they don't want to sign leases that are You know below this year's numbers if they can afford not to or or to wait so it's we're not seeing a big dump yet, but You know those that are on a bit of nervous side are Are definitely, you know looking at ways that they can try to fill their unit and leave somebody else's bank and You know, um minute ago. By the way, there were a couple things you said I wanted just to uh make sure I understood You talked about managing a couple thousand units Are these ones that you and your because you actually have several companies, right? Yeah, we have we have a number of companies. So we manage, you know, but does or so hoa as we manage single family up through 15 units we don't do any apartment complexes. That's a you know, different bird But all those combined were in the couple thousand um unit range and it gives us a bigger perspective on on life You know as far as all things davis real estate, I guess And then the term hoa. What is what does that mean? Uh homeowner association. So, okay, uh, so we manage like stone gates We manage, uh, elmas arrow parts of elmas arrow Anything that has a association There's probably 20 or 30 in davis and we have the majority of them in davis that Are large and those are the those are the properties where the hoa takes care of A lot of the maintenance of the property the owners paid dues And you know, it's they they take care of their own house But you know, the hoa takes care of you know, in some cases all the exterior maintenance or Um or the landscaping or the insurance or you know, that kind of stuff like that So uh, you you went to school at uc davis And i'm trying to recall you before college you were living in davis as well, right? I think I went to pioneer elementary school and then the holmes junior high and davis high school and then uc davis and then they I did my mba at university of maryland okay The point is you've lived in davis a long time You know davis really well and obviously you're quite active in it the conditions that we have now Have you ever seen anything like them? No, uh, even the even the great recession of 2008 to 12 was nothing like this You know the last couple of recessions and I actually love the study recessions surprisingly, but the last few recessions have all been banking related um the fsl ic debacle the um the Last one was uh, you know banking related investment related this you know, for the for those that don't remember the 2008 to 2012 recession Was often you know highly caused by banks that if you could fog a mirror Proving you were alive. They'd give you a loan. It doesn't matter what your income was or you know anything like that And so people were going out and buying property because appreciation levels at that time were huge They were in some cases between 2001 and 2005 We were appreciating between 20 and 25 per year. So people thought oh I don't need to put anybody in the unit I just need to own the unit and I'll sell it a couple years from now make 50% on money that I borrowed You know 95% on the property Well, that worked for a few years But when the piper came calling, uh, all of a sudden you had this mass number of vacant homes That the banks ended up taking back, you know, it took years for those banks to get through all that That's not the situation we have here. Our vacancy rating Davis is, you know, less than 1% At least it was before we started the c19 and the the regulatory industry Is So tight right now and has been for the last few years that they really You know the the loans that are out there right now are really good loans And unless some catastrophe happens with that individual, you know, they're they're going to be just fine on the lending side We own a mortgage company and interest rates right now Have dropped. I just looked this morning. I mean, you know close to 3% on a 30 year fixed or 2 and a quarter percent out of 15 year fixed are incredible rates, but one thing we have found that Or is going to affect the upper end market just, you know, a little bit until they reopen it up but A jumbo loan or conventional loan is anything up to about 576 And everything above that is considered a jumbo loan and that's $576,000. These are mortgage loans you're talking about. Correct. Yeah, and what's happened is the The market in wall street has decided that they don't want to buy those jumbo loans anymore So the lenders that you know the loans that we used to be able to get people in the jumbo category have all But disappeared for now. I mean, there's a few out there, but you know, for the most part, they're gone You can't hardly get a loan above 576 right now But the lower Lower than that if people, you know, those that are in place right now and have owned their home, you know Quite a while. Most of those people have loans that are under, you know, $575,000 And we're seeing a huge number of refinances which is helping people's cash flow as well Okay, I was yeah, see the interest rates are a number here too. And of course, these are huge loans We're talking about convention, you know, in a normal sense, but Davis is that kind of a market I should do a quick ID. We are talking with Steve Boschkin who Real estate mortgage real estate broker mortgage broker Manages properties grew up in Davis as well. This is Davisville on kdrt and I'm bill Buchanan So we've got probably about about 12 minutes left. I do want to talk about the Housing prices in Davis as well. Um, what are they doing right now? That's a great question because you would think that with everybody sheltering in place that we would be tanking right now And over the last couple of months things have slowed down a bit on the number of sales But surprisingly since the first of the year, we've closed 105 homes in Davis And, you know, that is right near where we were a year ago without c19 involved prices themselves are Within one tenth of one percent of where they were a year ago. We're not seeing a huge amount of depreciation yet I say yet because who knows where all this is going to go You know, we've been waiting for the next recession. So, you know, trying to figure out where that is I think we found it. Well, you know that it's kind of remarkable I mean, uh, I did you think housing prices are is the economists say a lagging indicator because I mean unemployment is Some people say 20 25 percent uc is announced to pay freeze It seems surprising that prices in Davis would would not have dropped Well And you got to realize that this time of year is pretty much our peak of the year You know from about march till the till july Is our, you know, top time of the year During the, you know sequester time, there weren't a lot of homes being sold. I mean, we'd sold some You know some numbers are we had a lot in january sell And even in february. So that's part of that number. But surprisingly now that the Governor and the county have released, you know, a few more Parts of the of our society to be able to open back up We're all of a sudden starting to see more homes come on the market We're also seeing more buyers come out of the house to look Where that will take us through this year is still yet to be known. I would say that our so for the past Two months the number of home sales are down 31% so there is a drop in the number of sales, but the prices don't seem to be Following yet that trend now you say, you know, you Mentioned the the amount of unemployed Davis is a bit of a unique, uh, you know island in the sense that much of our community Not excluding the students obviously but much of our community are state federal or high income earners who Have a do a pretty good job of having a lot of savings even during the The 2008 to 2012 recession Davis dropped a total of 20 to 25 percent from their highs of 2005 And those are prices or sales or No prices, okay Where you go over to natomas Parts of sacramento some of those dropped over 80% on their prices sales prices and davis so far have held Okay, there's negotiating going on between buyer and sellers the buyers are in some cases a little bit on the nervous side, but You know, I would expect a our normal List price to sales price Usually within two or three percent So, you know, when we list a home we expect to get somewhere between two and three percent Within that price as the sales a lot of times this time of year. We're getting multiple offers We're not getting that many right now To drive the prices up So you're seeing an effect, um, but uh, and and I heard you a minute ago You say you know where this is all headed I was tempted to ask you where you think it's headed, but I guess really Who knows right? Yeah, unfortunately, I dropped my crystal ball, but um from a conservative standpoint, uh, you know, I would um, I would think that While we work our way through how we're going to pay back and re-employ all of the money that, uh, Well re-employ the people and pay back all of the Trillions of dollars that the federal government has been dishing out That's going to have a bit of an effect on on purchasing but oftentimes when we go through major events in life The real estate market in the next year or two starts to really take off It's just this kind of weird trend and and if you look at you know past recessions The same kind of thing happens after the we hit the bottom You know people are nervous to get back in but those that have you know, the get back in often make a lot of money In you know owning The the properties that they own because the inflation level um that starts to happen is Greater a lot greater than you know than the average time Uh inflation is so So a couple of the questions I wanted to ask one was and this draws on everything your uc davis experience degree living here What should we take out of this experience? Do you think I mean is the davis housing market going to permanently change From what we're going through Oh, and and if it is why and if it isn't why very broad question Well, and and I can appreciate the broadest that question and I think the reality is If you're only looking at a point in time in the next year You know, I'd be nervous about going in going into the market You know full full bore But the reality is in real estate you can't just look at the next year You have to look at the next five years the next 10 years And the majority of people in davis that are buying and selling Are not buying and selling to buy rentals. They're buying their own personal property. So if you were to sell today and um And go out and buy another house even if it drops a little bit over the next couple years It will come back. You know, we're we're um, there's a subdivision out in Northwest davis called breton woods that is our latest um subdivision And you know, there's a lot of people that are ready to jump into that And I think what they've figured out is that you know, they sell the Their existing home that they've lived in for many years And they buy their new home out there and They're not going to move again for a number of years and in many cases that will be their last home, but I'm not afraid to be a buyer in this market In fact, I you know, I like to look for deals in this market I was going to say a minute ago when you said that the prices will come back. I thought that's a That's a pretty confident statement to make right now Um, well, have you ever seen them permanently ever stay down? Well in other in other markets I have and and I don't know davis history like like you do But but I would imagine if the economy got bad enough or things got uncertain enough Well, even even during the peak of the recession You know, detroit had dumped, you know, their prices. They were probably the worst in the country They had a significant number of homes that were down in the six to ten thousand dollar range You could buy a home for that cheap. There were just so many vacant homes there that nobody wanted them Well, their market those same homes today are in the hundred and twenty hundred and thirty thousand dollar range And it's you know, in real estate time kind of cures everything as long as You don't go pulling a whole bunch of money out and put yourself in a bad debt position I think ultimately Everything will come back and it may not be immediate. I mean that it may we may Very well play flat for the next five years Or we can take a little hit. Well, in fact another question I wanted to ask was What key factors or indicators in the next month or two? Do you think will tell us how things are headed in Davis? I mean, should we be looking at unemployment rates or what? Um, I well, I don't think anything that is going to happen in the next couple of months Is going to indicate where we're going to be two to five years from now um, you know, just unfortunately, you know, there's there's Everything that's going to come out in the next couple of months You know, obviously it's going to change by the day anyway, but is only going to affect Probably the next year or two Anyway, I mean Well, I guess then what indicators would if you saw it what indicators would tell you hey, we're we're coming out or Maybe we're getting worse yeah, the The last week or so and of course that's a very short period of time But the last week or so it may be the weather it may be that people have been sequestered too long and You know their their psyche has been, you know, kind of beaten down while they were Not able to go out But there's a lot of exuberance right now that they are able to get out in the sun Um, although I hear this weekend supposed to be a hundred and something degrees, but They want to get out. They want to be out and be part of society again And I think that that will give the overall market A little bit of Positive light at the end of the tunnel You know, it's not going to be the cure for everything But it's on the path to the cure And I I guess it'll depend too on on how the pandemic goes obviously whether We tame it or not Well, Steve, thank you for taking the time to talk with us today. Yeah, it's been bad. Thank you We've been talking with Steve Boschkin a real estate in Davis and this is davisville and thank you for listening