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Show Summary
In this episode of the Real Estate Pros podcast, host Micah Johnson speaks with Rick Sharga, a market intelligence expert in the real estate and mortgage industry. They discuss the unique housing market cycle post-pandemic, the indicators of market recovery, challenges for investors, and emerging markets for investment opportunities. Rick emphasizes the importance of understanding local markets, demographic trends, and the need for due diligence in real estate investments. The conversation highlights the evolving landscape of the housing market and offers insights for navigating future opportunities.
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Rick Sharga (00:00)
what I think has really happened ⁓ since the price bubble and the mortgage doubling,is one of two things could happen. We could either have a price crash. And if you’re on YouTube, you still see people that are promoting the notion of a house price crash. Please don’t pay any attention to them. Or what you have is a period of time where the market goes through kind of a reset period. And when this first happened, my thought was it was going to take the market about three to five years to adjust and reset.
Micah Johnson (00:18)
Mm.Okay.
Hey everyone, welcome to the Real Estate Pros podcast. I’m your host, Micah Johnson. And today I am joined by Rick Sharga, who has been making serious moves with a market intelligence firm for people in the real estate and mortgage industry. And I know that was a bit of a mouthful, but this is one of the most fascinating topics. I’m really excited for it. Rick, welcome in, man. Glad to have you. Absolutely, man. I think our listeners are…
Rick Sharga (02:29)
Nice to be here, Micah. Thanks for having me.Micah Johnson (02:33)
really going to take some value away of one, just the breadth of your experience in the industry as much as you’ve been able to see now for so long and particularly where that places us today in the current market cycle. So let’s dive in on that for people who may not know you yet. What is your main focus right now and what markets do you operate in?Rick Sharga (02:53)
Yeah, I really do deliver market intelligence kind of on a national basis for companies that are in real estate and mortgage. so that requires me to kind of keep my finger on the pulse of everything related to the housing market, the broader housing economy, what’s going on in the mortgage industry, foreclosure activity. And I do an awful lot of research around the whole notion of real estate investing, who’s buying, where they’re buying, what they’re paying, how they’re doing. So it’s just…⁓ It’s a kind of a sweet spot in my overall focus.
Micah Johnson (03:28)
Awesome. It’s fascinating to me. I’m excited for what we’re in on because take us into, let’s dive into what are you seeing? let’s take the, take us through your experience first and then what you’re starting to notice based on what’s been happening here for the past few years.Rick Sharga (03:46)
Yeah, let’s just focus on that, Micah. We’re coming out of a very, very unique cycle that we’ve never experienced before in the housing market in the United States. And we can go back to COVID and thank the pandemic for kind of throwing us out of whack. But we came out of the pandemic and in about a two and a half year period, home prices across the country went up by about 50%, which is just a…a crazy price increase in a very short period of time. We had real anomalies like Boise, Idaho, seeing prices go up 47 % in one year, ⁓ which has never happened. And on the heels of that, we had an inflationary problem that the Federal Reserve decided to try and address by raising the Fed funds rate. And we saw mortgage rates double. We’d never seen mortgage rates double in the history of the United States in a calendar year.
And in 2022, they doubled in the matter of a few weeks. So that just crushed affordability. That one-two punch of home prices going up by almost 50 % and then mortgage rates doubling overnight. And we went from a market where we were selling six million existing homes a year in 2021 down to five million in 2022. And now for the last three years, we’ve kind of flattened out at about four million existing home sales a year.
And you and I were talking about this a little bit before we went on the air. from my perspective, given the size of our population and the size of our economy, we really should be selling closer to five million properties a year. But affordability has just kept those numbers down. It’s been a huge, huge headwind in the home sales market. And from my perspective, I think four million becomes the baseline. That looks like probably the lowest number of homes we should expect to sell in the United States.
in the course of a calendar year. And that’s people that feel like they need to sell. There’s a catalytic event in their lives. They get a new job, they lose a job. There’s a birth in the family. There’s a death in the family. Something happens. It’s a catalytic event that causes them to want to or need to move. And that number is about 4 million. And
what I think has really happened ⁓ since the price bubble and the mortgage doubling,
is one of two things could happen. We could either have a price crash. And if you’re on YouTube, you still see people that are promoting the notion of a house price crash. Please don’t pay any attention to them. Or what you have is a period of time where the market goes through kind of a reset period. And when this first happened, my thought was it was going to take the market about three to five years to adjust and reset.
Micah Johnson (07:05)
Mm.Okay.
Rick Sharga (07:19)
And so from my perspective, 2025 wasprobably year three of that reset period. And as we got to the end of the year, I was starting to see signs of a market recovery. And I believe that in 2026, we’re going to start feeling like the housing market is in the early stages of recovery. As we go from the beginning of the year to the end of the year, I think we’ll start to see the housing market really feel better and feel like we’re on the road to moving back to what are more normal times in housing.
Micah Johnson (07:53)
And I’m sure there are a lot of folks that are happy to hear that right there because it’s been an interesting time. you know, we talk about market cycles all the time in real estate and how they repeat, it’s fascinating that we finally hit one where, it was a cycle, but it was nothing like we’ve ever seen. And now we’re truly watching almost in real time every day. Okay. What’s it look like to recover from that? What we haven’t seen it before. We can’t say what it’s going to look like, speculate all we want.Rick Sharga (08:10)
No.Micah Johnson (08:22)
But we’re literally living it out on a day to day basis of, okay, here’s how you recover from a market that did this.Rick Sharga (08:29)
Yeah, and the reality is when you have a shock to the system like we did, and really the shock was felt mostly when the mortgage rates went up overnight, it does take a while to reset. And the solution to the problem, which nobody wants to hear, is time. It just takes time for things to normalize. And the reason I said that the end of 2025 started to feel like the very early stagesof a recovery is because we have three market conditions that started to shift. And these are important conditions for investors to be paying attention to. One is that home prices across the country started to settle down. ⁓ We went from a year ago, home prices going up 5%, 6 % year over year nationally, to home prices going up a little over 1 % in the latter part of the year on a year over year basis.
And in some markets, actually going into correction mode, actually declining a little bit year over year. So that was one thing that we needed to see from an affordability perspective. A second is that we continue to see wage growth ⁓ improve. so wages are going up about 5 % year over year. That’s almost twice the rate of inflation right now, certainly much higher than the rate of home price appreciation. So that’ll help from an affordability perspective.
And then the third thing is we finally started to see mortgage rates come down a little bit. ⁓ I don’t expect we’ll ever see two and three percent mortgage rates again, but we’re now close to getting below the six percent mortgage threshold. And that’s bringing more buyers to the market. So those three levers, if you will, of affordability are all moving in the right direction right now. And I think we’ll continue to see slow improvements as we go through 2026.
But even those incremental improvements bring more buyers to the market. And as that happens, I think it starts to fuel that recovery. Over time, fewer and fewer of those homeowners are going to be sitting on 2 and 3 % mortgages. More and more will be at current mortgage market rates. And that opens up more inventory to come to market and makes it easier, for example, for a fix and flip investor to find a buyer who’s able to afford that property that they’re looking to resell.
So those market conditions have been improving slowly over the course of 2025 and I think will continue to improve in 2026.
Micah Johnson (11:38)
I agree. And if any other statistics, one, I remember in the realtor days, it’s about on average people move every four to five years anyway. And you’re getting to the point where we’re hitting the time and again, like normalization of just hearing those higher numbers. I was talking with an investor the other day, he started in the seventies and he thinks it’s funny what the numbers are now. It’s like to me, man, we had 11, 15%, like 6 % is cheap. So it’s like,Rick Sharga (11:47)
Yeah.Micah Johnson (12:07)
getting this perspective on what it is that you’re looking at, because it’s, we have to stare at the same number all day, right? Like we only see it a day at a time. And then over time, we can zoom out and see what’s going on. So the reality is, based on what you’re saying too, more and more people are to be coming to market for a lot of good reasons. Natural things are starting to take place. We got three levers, prices calming, wage growth, mortgage rate drop, like all theThe ingredients are there, like the recipe’s making itself and it’s just bacon.
Rick Sharga (12:39)
Yeah,know, the last few years have been really tough for fix and flip investors. ⁓ And because of that, we’ve seen the number of flips go down, I think, for four consecutive quarters now, according to some reports from Adam Data. We’ve seen margins compress. We see other issues that we haven’t even talked about, like homeowners insurance rates going through the roof.
or homeowners insurance being unavailable in certain markets because of extreme weather events and the losses the insurance companies have been taking. ⁓ And I know a lot of flippers, experienced flippers who really knew what they were doing, wound up losing money on deals they were doing in 2023 because they bought properties in 2022 before the rates doubled. And suddenly the buyers they expected to come to market couldn’t afford
⁓ the list price because their financing costs have doubled. So the fact that things are settling down a little bit, I think bodes well for flippers. Demographics certainly play in their favor. We had about five million people turn 35 in the country. In 2024, we had a similar number turn 35 in 2025. We’ll have another similar number in 26. Those are all people typically who are coming of age from a home buying perspective.
and are going to be looking for a place to live. The last few years have been really much better opportunities for investors who are buying properties and renting them because these young adults simply haven’t been able to afford to buy a property in today’s market. But again, I think those conditions are starting to shift a little bit. And I really do believe that 26 will be a better year for flippers. But you’re also going to have to be careful about
what kind of properties you’re buying, how you’re pricing them, and be really, really aware of local market trends. I always tell investors, you want to look for markets where population is growing, where jobs are growing, and where wages are growing. And if you have those three things happening in a market, it’s going to be a good real estate market. Whether you’re looking to sell a property to an owner-occupant or whether you’re looking to buy a property and rent it out to a family, those are the kind of markets you want to be looking at.
And you also want to be looking at markets if you’re looking to rent a property that you can buy a property at a low enough price that you can immediately get positive cash flow on a rental. just so many market conditions you have to be aware of, so many details you have to look at depending on where it is you’re looking to invest in properties and what your end goal is, whether it’s to hold properties long-term or sell them at a profit.
Micah Johnson (16:01)
It has definitely required a savvy investor to stay right. Other I’ve seen other market cycles where they all do the same thing. They get the riff-raff out. Like if you’re not good at it, you ain’t going to survive one. But when there’s ones like this, like this unique one that made the pros start to struggle because you’re right. Those are the guys that rise right to the top whenever the market gets hard. Like they don’t mind it. That’s the blood in the streets mentality. That’s when they can capitalize most, but this one didn’t do that.And like you’re saying, unless you were lucky, you had to leave your backyard. You had to start studying markets and understand what can I do? Where can I do it? Where can I still do that thing? And now I hear way more people in multiple markets than I heard before. Most used to just stay right in their backyard. And now I was on a long-term hold call the other day. He’s in four states now. I he was only in one for the longest time then boom, right into four.
It’s like, okay, that makes sense. And it lines up with the data you’re talking about, these things you have to find that will be available. Now, what do you see in those opportunities? How can people capitalize on 2026? What can they pay attention to?
Rick Sharga (17:09)
Look again for migration demographic trends. ⁓ We do still have people moving out of the more expensive markets into less expensive markets, whether that’s moving to ⁓ something that’s adjacent to a major metropolitan area, but less expensive pricing, or whether it’s a less expensive state. ⁓ Anecdotally, I have ⁓ two adult kids. One lives at home. One recently got married. ⁓The married one is a teacher, his wife is a lawyer. We live in California. They came to me to ask what states they should be looking at to move to so they can someday afford to buy a house. And I suspect we’re not the only family having that conversation in an expensive state like California, where the median price of a home is $850,000. ⁓ So I do think it makes sense to be looking at markets that are less expensive.
Micah Johnson (17:58)
while.Rick Sharga (18:05)
but population is growing because that’s where you’re going to have both your rental and your fix and flip opportunities. So what does that mean? That means you’re probably looking at states like South Carolina, like North Carolina, like Tennessee. You might be looking at parts of Florida. You have to be a little careful in Florida because there are parts of the state where property values are continuing to decline. So if you know the market and you’re smart enough to buy on the dip, you might be able to actually make that work to your favor.but you also don’t want to be the one catching a falling knife. So I do think 2026 will probably still have more opportunities to buy and rent than we will to fix and flip. I think that will gradually level out as we get through the end of the year and move into 2027. ⁓ But again, it’s a look at where people are moving and a lot of that movement is to the South, Southeast and Midwest where property values are less expensive.
Micah Johnson (18:37)
Mm-mm.Mississippi is another one I’ve been hearing more and more people investing in finding that cash flow, the kind of properties where you can go find cash flow now. Like that’s what they’re looking for. And those, those ones are true. thinking I’m born and raised in Florida and the Northern part of it. And I’m just thinking around, I’m using the, your, what you’re talking about where price is calming wage growth, those things, job population wage. And I’m thinking through these little towns that are
Rick Sharga (19:14)
Mm-hmm.Micah Johnson (19:30)
Not many people would know about, but are exploding right now. There’s one I grew up near called Lake City, which it has I-75 and I-10 running through it, which are big interstates on the East Coast. just, I’m like seeing all the data you’re talking about and then looking at these places, it’s like, wow, okay, this is, I don’t know, I geek off on that stuff. That’s so fun.Rick Sharga (19:51)
Well, data canbe fun, even though people think it’s not fun and it’s all math. ⁓ There are parts of the country, I mean, Ohio is probably one of the most, one of the least talked about states in the country in terms of real estate investing. But Columbus has been this hidden gem of a market for years and continues to be a good investment market because of the job growth there, because it’s tethered to the university, the Ohio State University.
There’s technology investment going on in terms of a fabrication plant for Intel. So, you know, when you see a market like that and where property values are still reasonable, ⁓ that Midwest corridor, ⁓ whether you’re looking at Western Pennsylvania or Ohio or Indiana, ⁓ a lot of gems in those markets where you wouldn’t normally think to look because they’re not places that typically get all the headlines.
Micah Johnson (20:47)
Yeah. Yeah. And it’s that’s, that’s another thing I think is interesting about real estate is if you can read the terrain, if you can look at what’s going on, there’s somewhere to capitalize all the time. You can buy into whatever doomsday you want to, but no matter what, you’re either going to solve the problem or you’re not. there’s somewhere, there’s some lever you can pull that’s going to find that deal, create whatever it is you’re looking for. As long as you’re willing to adjust, as long as you’re willing to pivot, you just got to be open to that part.Rick Sharga (20:57)
Yeah.But a couple of caveats for investors for next year, you’re talking about Florida. There are parts of the Gulf Coast in Florida where homeowners are now paying more for their insurance on a monthly basis than they’re paying for their mortgage. So it typically hadn’t been something investors had to factor into their acquisition price or their holding costs. Insurance was kind of de minimis and you you just kind of deal with it when it came. But
When you’re seeing insurance rates double and triple in a year, suddenly that becomes a big affordability issue. And if you’re going to be flipping a property, you might not think it’s that big a deal because you’re only going to be holding the property for a few months. But your buyer now has to factor in those insurance costs and may not be able to afford what the property used to be valued at because now they have to factor in that mortgage and the insurance as part of that mortgage.
And they may not be able to afford what you think you’re going to be able to sell the house for. So there’s things like that. There’s markets where I wouldn’t touch a condo if you paid me. ⁓ And condo markets are always much more volatile than your typical single family units. So I do think there’s some cautionary notes as you go into next year. ⁓ And ⁓ keep an eye on the economy. ⁓ It looks like it’s
going pretty well right now, but jobs numbers are weak. So that could be another red flag and you want to keep an eye on what’s going on in terms of unemployment rates in any market you might be looking at as well.
Micah Johnson (22:54)
So before we wrap up here, what’s that final word you wanna give to the listeners, that closing point on just how to make sure they’re doing well? what I really hear you hammering on is do your homework on your deals. Do your homework on your market. This is not the time to not pay attention to the details. Like the devil’s in the details right now. So you gotta be very intentional to close that off. What would you say?Rick Sharga (23:22)
I’d say know your local market. And by local, I mean wherever you happen to be investing. ⁓ This is a good time to broaden your network of local market experts. And that’s particularly true if you’re planning to invest beyond your usual geography. ⁓ They’re gonna be the ones who help you find the best deals, who can advise you whether a property’s in a desirable location or an undesirable location.So doing your homework, doing your due diligence is probably more important now than it’s been in quite some time. But the light at the end of the tunnel finally looks like it’s probably not an oncoming train. It really does look like the housing market is getting ready to recover. And I suspect that 26 will be a little better than 25 was. And I think by the time we get to 27, it’s going to feel like the housing market’s in much better health than it’s been for the last few years.
Micah Johnson (24:19)
Man, that’s great. Thank you so much. I appreciate it. I appreciate your story, your time. I love getting to talk to folks about these kinds of subjects where we really, it’s real stuff that you can take out there and apply right away. So for those of you tuning in, thanks for joining us. Rick, if someone wanted to learn more about you, learn more about the company, what’s the best way for them to find you?Rick Sharga (24:40)
We do have a website, but ⁓ honestly, I post very regularly on social media. So I’m very happy to connect with folks on either X ⁓ or on LinkedIn and ⁓ not very hard to find. Just look for my name and you’ll find me there.Micah Johnson (24:56)
Excellent. We’ll make sure your links are in the show notes below. Again, everybody, thanks for joining us today. Thank you so much, Rick. We’ve got more conversations coming up with operators just like Rick are out there learning, digging in, understanding what it takes to be successful right now in the industry. Thanks again, everybody. We’ll see you in the next episode.
