Jason Hartman and Investment Counselor Adam begin the episode discussing Jason’s first-ever car. He adjusts the price of his previous cars to inflation. Then they go into a discussion about McMansions and the new generation. In the second segment of the show, Jason finishes his conversation with Jeff Fromm, the Millennial Marketing Guy, about Gen Z & Y. They discuss the difference in habits and advertising between the two generations.
Investor 0:00
When you combine education which you provide with action, there’s really nothing you can’t accomplish it when you put your mind to it. And despite like the evictions, we’ve had a few evictions, we’ve had some issues, we’ve had maintenance, we’ve had this and that. But looking at the big picture, if you can look and not microwave your success, you have to look at the big picture. And look down the road five to 10 years is something you can control. This is a great avenue. And as you’ve said it millions of times as text favorite is anything you can get right? So it’s been a good ride that way. So I just say look at what your financial goals are and who’s in control of them. And then look at real estate and you can I think you can get a very good marriage that way.
Announcer 0:43
Welcome to the creating wealth show with Jason Hartman. You’re about to learn a new slant on investing some exciting techniques and fresh new approaches to the world’s most historically proven asset class that will enable you to create more wealth and freedom than you ever thought possible. Jason is a genuine self made multi millionaire who’s actually been there and done it. He’s a successful investor, lender, developer and entrepreneur who’s owned properties in 11 states had hundreds of tenants and been involved in thousands of real estate transactions. This program will help you follow in Jason’s footsteps on the road to your financial independence day. You really can do it on Now, here’s your host, Jason Hartman with the complete solution for real estate investors. Welcome
Jason Hartman 1:34
to Episode 1314 1314. Thanks for joining us today. Adam is here with me. And we got to talk about a few things that are important number one, what do you think dear listeners, the number one generation the number one demographic cohort is that will do anything. They will go out of their way. They will beg, borrow and steal Steal,
Jeff Fromm 2:00
they will move,
Jason Hartman 2:02
they will move, they will move to own a home to become homeowners. What do you think that generation is? Hint? It’s not who you think it’s not the demographic cohort you think it is. We’ll get to that in a moment. Adam, what’s going on today?
Jeff Fromm 2:17
Oh, you know, just live in life, I was finally able to get a hold of you. You know, you’ve been so busy after prophets in paradise. Just kind of checking in and seeing how the listeners are doing now.
Jason Hartman 2:27
Well, hey, it’s good to have you back. But I’ll tell you doing almost not exactly back to back events. That’s a lot of work. It takes a lot out of your week, we had the venture Alliance mastermind investor cruise, where we sailed up to New England and Canada, New England states and Canada. And then a little bit of time in between and right into profits in paradise. So I love doing events. I love seeing all our people, our clients, I just absolutely love our clients. They’re the greatest people. But I tell you those events They do take a lot out of Yeah. But it’s a labor of love. It’s definitely a labor of love. Hey, I got an interesting thing. You know, I put my car on the market. I’m not just crazy about my car. I need a car with more space in it. My car is too much of a sports car. And it doesn’t have enough cargo capacity. I really noticed this because I drove to Orlando to profits in paradise. And you know, that car just does not hold enough stuff. And so I was thinking my car was kind of overpriced. And then all of our brilliant listeners, they know exactly what I did. I compared it based on the inflation rate to prior cars that I’ve owned. It was kind of interesting. My car was actually a much better deal than I thought. Now, my car I’m two years into my lease. I paid $82,000 for my car, my German engineered car. And you know, I thought my car was kind of overpriced. Christ. But then I compared it to the first what we’ll call, luxury car or expensive car that I owned. When I was 22 years old. I walked into what was then Jim sliminess Mercedes Benz in Newport Beach, California. It’s now Fletcher Jones Mercedes Benz. And I walked in and I couldn’t get a sales person to pay attention to me. They thought, who’s this kid? He’s just looking at cars. And I’m like, No, I’m actually gonna buy one. So I bought a Mercedes 300 e. And that car was about $40,000. So I just did it for inflation. And I discovered that my car in inflation adjusted dollars is actually cheaper than that car was when I was 22 years old. How do you like that? And that’s only based on the official inflation rate. Of course, not the real inflation rate, if you will. You know, Adam is Isn’t it amazing how, when you really do the math, sometimes you feel like you’re losing when you’re actually winning. You gotta know how to do the math so you can keep score properly, right?
Jeff Fromm 5:13
Yes, you do. And I have to say, I didn’t have my first new car until I was way older than 22. I was I was driving the beat down cars whenever I was that age.
Jason Hartman 5:22
Well, my first car the first first one was $700. I paid cash for it. It was a real Junker Let me tell you, it was a real Junker that I saved up my money and bought my second car with cash a Toyota four by four which was my dream vehicle. I bought that in high school and and I was totally cool kid have an Atta boy at a four by four.
Jeff Fromm 5:46
We’ve got a good story that you and the listeners will appreciate. My very first car. This isn’t going to sound interesting leading into it my very first car. I have a picture of me at two years old being held next to it.
Jason Hartman 5:58
Oh because you inherited It hit him.
Jeff Fromm 6:00
It was in the family and it got passed down. So I have a picture of me at two years old being held next to my first car. Well, 14 years later, you actually
Jason Hartman 6:07
took possession, I
Jeff Fromm 6:08
guess, right.
Jason Hartman 6:11
And it’s pretty cool. Well, hey, listen, don’t feel like you were underprivileged. Nobody gave me a car I had to buy my car is always so the first one, the second one, and the third one I financed and get this just to give people a perspective on inflation. My third car was brand new was my first new car. I bought it when I was 19 years old, because I had just received my real estate license, my first year of college, and I thought, I gotta have a car that I can show people properties in. And the good old Toyota four by four isn’t going to do the job. Unless I put them in the back and show them houses. I don’t think that’s going to work. And so I financed I purchased a Volkswagen Jetta and I liked that car question. A bit. And it was $189 a month. And I lived at home and I remember I did it myself. I didn’t get a cosigner. I really wanted to do it myself. I came home and I told my mom that I financed the car. And she just about had a fit, but I agree to pay $199 on a five year loan to purchase that car. She was not happy with me.
Jeff Fromm 7:31
So what you’re saying is you were willing to do whatever it took to get that car
Jason Hartman 7:35
Yeah, I guess like the gym. Well, we’re not going to tell which generation will do whatever it takes to get a house right is that you’re saying? Well, that was
Jeff Fromm 7:41
my segue. Yep, I was that was pretty good.
Jason Hartman 7:43
I caught it. I caught it. Go for it. Tell us
Jeff Fromm 7:46
so what generation is the most willing to do whatever it takes to buy a home? That is a millennial surely the millennials right now, now not the gens ears. We’re looking at the Gen Xers millennials aren’t even Second place, Millennials are behind the Gen Xers as well,
Jason Hartman 8:03
as my group I’m
Jeff Fromm 8:05
extra. So the the millennials are not willing to do anything. Now this includes moving to another city or state. So the mobility of the millennials isn’t quite as important when it comes to the house purchasing. I think that’s more looking at mobility in terms of where you want to live lifestyle wise.
Jason Hartman 8:25
I kind of question the validity of this story, this news story because how did the writers know that that’s true that Jen’s ears are too young to I don’t know, they just seem kind of too young to be able to say they’re gonna do anything to get a house. I mean, how do they know that yet? You know, what do you think
Jeff Fromm 8:46
the gens ears? The youngest ones are potential homebuyers? I mean, they’re Yeah, either in their early 20s. So yeah, I mean, they’re not necessarily bad. I mean, those are especially you look at the early 20 year olds, they’re the ones who are starting to think buying the homes. So they have to say, Yes, I want to and I’m willing to move. So I mean, I think it’s fair to ask a 25 year old person, Hey, what are you willing to do to buy a house because a lot of people at that age are thinking about it, and maybe not buying the McMansion down the road, but you know, nice, quote unquote, starter home, they might be looking at, and they might be seen what they’re willing to do. So, I mean, I think it’s a legitimate question to ask.
Jason Hartman 9:25
In this segment. We’re doing part two of our interview from yesterday, talking about millennials in that cohort, and you know, what more about what they’re like, but I asked our guest, and the listeners will hear us more about the mcmansions. And you mentioned the mcmansions. And I think this is pretty important. I was talking to the listeners about how I was thinking of buying a McMansion for my own home, I just never owned one and I thought it’d be kind of cool, but then I think of like, do I really need this maintenance headache and you know, it just seems like another half Frankly, you know, at this point in my life, I want to spend my money on things that complicate my life less, not more things that give me another job I’m not super excited about I just, I want to throw my effort into my business. I like the creativity of business. And, you know, I find that to be more interesting than managing the gardener and the pool man. But, you know, I think there’s a big hole in the market for those mcmansions if any of our listeners owns a larger home, you know, maybe you would or wouldn’t it wouldn’t call it a McMansion. It depends where you live, and it’s, it’s relative to your own market place in your own geography, but if you own a larger home, I just don’t see a big interest in the next wave of buyers coming to buy those homes. It does not seem and our guest from yesterday and today agrees with me that it doesn’t Seemed like millennials would be buyers for mcmansions. Generally speaking, of course, it’s a stereotype and right, there are exceptions. But
Jeff Fromm 11:09
what problem is as family size shrinks, there’s just no need for you know, you have fewer families with three, four or five kids. You’re looking at more people who have one or two kids asking, Do I really need 4000 square feet, or 1000 or 7000 square feet. I mean, when we bought our house, we had two kids, and it’s 3400 square feet. And my wife was like, This is way too big. This is more than we’re ever going to need. And then we had twins. And so you know, it became not quite as excessive as that. But I do think people are asking, Is it worth my money to do that? Now, one of the interesting things you were talking about this article about who’s willing to buy is one of the things that stuck out to me is over half of the respondents the study said they hadn’t heard of Fannie and Freddie is low down payment options, or the FHA loans at all. And they thought their credit score was too low. So we are competing for properties with people who don’t even understand their financing options. That’s scary. That’s a really, that’s a really good thing for us as investors, and especially, you know, as we buy from market specialist is the competition just isn’t there? Because people think, well, I don’t have enough money necessarily, or my credit score got dinged back then. So, you know, I’m not good enough to get a loan per se, but they don’t understand, in some ways how little it takes to become eligible for a home loan.
Jason Hartman 12:33
Right, right. That’s true. But I think I just don’t picture millennials with their environmental conscientiousness and their tech savvy leanings, and their sort of portability ethic. I’m making up that phrase, right. I’m going to call it the portability ethic, which I think is actually quite significant. I just don’t picture them wanting a big spread. I don’t think It has that much to do with family size, you know, a little bit sure, but you’d have to have a massively large family to need a seven to 12,000 square foot mansion, okay? It’s just not necessary. It’s a desire, not a need. It’s a want not a need. So I guess the point of this to everybody listening is, look, if you own one of these houses, be careful, because I don’t think there’s another wave of buyers coming to buy it from you. Whether it be the millennials, or the Gen Z, I don’t think either of those cohorts would be interested in the McMansion, it still remains to be seen. That’s just my prediction, my thinking. So if you’re gonna buy one, you better get a good deal on it, and buy it right going in. But, you know, again, the topic of this show is investing. So I just want to mention that when it relates to your own home. All right, you had one other piece you wanted to talk about quickly before our guest, right?
Jeff Fromm 13:59
Yeah. We wanted to Talking about he locks loss. Yes, the home equity lines of credit. Americans aren’t doing it anymore. I mean to put together there is not doing it as much it became big, you know, we’re in the run up to the Great Recession. And it has since been slashed. And the interesting thing is, it’s gone from 5% of the banking assets all the way down to below 2%. I mean, we’re getting close to, like 2004 levels of Home Equity peaked in surprise, surprise. 2009 in that area. I mean, it says 4% of households had a line of credit in 2016. Yeah, that’s it. Yeah.
Jason Hartman 14:43
Now, here’s the thing that doesn’t tell us, although it still bodes well. Okay. It doesn’t tell us the amount of equity they have the loan to value ratio of all the housing stock which by the way, I do happen know that and Adam unite to It is pretty good. So the equity position in the marketplace is is good. In other words, it bodes well for a stable market without any kind of massive decline or housing crisis. So that’s good. But I want all of our listeners to hear this and think this is good for the market in general, but it’s not what you should do. Okay, what you should do is the opposite of this. You should be using your equity and not having sleepy equity. Now, you got to do that prudently. Don’t be silly, as Eddie Murphy would say in Beverly Hills, GOP. Tempe, Philly. How did he say it? I don’t know. It was pretty funny in that old movie. Adam, that was a movie like when you were a little kid. millennial. That’s the thing you know, use that equity. You want to make it work for you. But this is good news. it bodes well for a good stable housing. Our Going forward even when not if, but when we hit another recession, which we inevitably will, and it may be right around the corner, nobody knows. it bodes well for the market. So that’s good to hear.
Jeff Fromm 16:13
Yeah. And you mentioned how much equity there is. There’s estimated at $6.3 trillion of housing equity
Jason Hartman 16:20
right now, the only problem is we don’t know compared to what because I don’t have those figures in front of me. Is it $6.3 trillion of equity versus 8 trillion in housing stock value? No, it’s not. But I’m just saying you got to know compared to what, right. So that that’s really the question, but overall, I do know that the loan to value ratio or the equity to value ratio of all the housing stock is actually poised. It’s pretty, it’s pretty good. Yeah. And one of the great parts about this is since they’re not using our homes like credit cards anymore, it’s going to hopefully keep us from having a whole bunch of defaults is people aren’t able to pay it back and they lose their home because they can’t afford to pay their loan back. And also, we’re not getting the massive influx of people pulling equity out of their house and using that line of credit to buy more homes or buy, you know, their next home or whatever they’re going to use it for. So it’s hopefully going to limit the bubble aspect of our real estate market. Absolutely. Like, the most important thing of that is not their ability to afford the payment as much as it is having skin in the game. Which, by the way, is the title of a great book. I just finished by Nassim Nicholas Taleb. I talked about it in the past few weeks. skin in the game, get that book, read it. It’s great Nassim Nicholas Taleb skin in the game. It’s a must. So check it out, folks. All right, Adam, we should tell our listeners to go to Jason Hartman comm check out the properties. Be sure there subscribe to the property cast podcast. So they get the updates on all the new inventories, it becomes available. I think we should get to our guest Right.
Jeff Fromm 18:05
Yeah. One last thing. If you any questions popped into your head after profits in paradise or if you have any questions for us, go to Jason Hartman comm slash Ask, ask your questions, and we’ll address that as soon as we can.
Jason Hartman 18:16
Good call Adam. Thanks for bringing that up. Let’s get to our guest. And we will finish Part Two from yesterday’s episode. Now, both of these demographic cohorts, I’d say would be typified by Well, we say like to think of themselves this way is socially responsible, interested in a company or a brand that believes in something as I mean, look at cause marketing has been around for a long, long time. This is not a new idea, right? But there are some distinctions about it with these two cohorts and employees whenever possible contrast and how are they different? What are your thoughts on
Jeff Fromm 19:00
So yes, cause marketing has been around for a very long time. You know, I did write a new book called The purpose advantage. And in this book, I tried to very much highlight the fact that today’s consumer, and even employees, when all things are equal, and they’re not always equal, definitely prefers brands with the soul. And the key part of this is less about generation and more about the ability to afford something. So if my economic situation doesn’t allow me any latitude, to be able to purchase something beyond whatever the low cost item is, then I’m buying a low cost item. On the other hand, I’ve met mentioned this day trader mentality, if they’re really efficient day traders and I’m making a decent living and I’m 22 or I’m 29 and I have a Jen’s ear and I have millennials both in the workforce who have discretionary income. So then I can be efficient in my trading up and trading down and I can have a private label twice when private labels the best option for me and I can have a Values oriented brand when I prefer a values oriented brand. And so what we’re seeing is a profound change in behavior driven by the fact that government, both sides of the aisle is not governing on any political issue. There’s nothing happening. And then real organized religion. You know, when I say the word innovation and organized religion, it’s not exactly something that goes hand in hand, right? People are like innovation organized religion. So we have a purpose whitespace void. And what we see is brands, connecting with people on issues, whether it’s Walmart, and the letter they sent to Congress, both sides of the aisle saying do your job, whether it’s Patagonia saying, we have to reimagine our purpose. We’re no longer just here to do no harm. We’re here to protect and defend and whether it’s Ben and Jerry’s on prison reform, company after company is filling this big void. And young people when they Can’t afford it are going to spend a small premium for brands that align to their values.
Jason Hartman 21:07
Okay, good. Good to know. What else would you like people to know as we wrap it up? Maybe a question I haven’t asked you just anything you want to share with our listeners?
Jeff Fromm 21:15
Sure. I think that the key thing to understand and the mistake that costs people millions of dollars is getting entangled in the myths around millennials and Gen Z deal with the hard data, not the myths. These generations are not homogenous cohorts. There are parts of the cohort that are thriving and there are parts of the cohort that are struggling a lot of that has to do with when they came of age. The discretionary spending today is significant part of how people express themselves, but often around brands that sort of stand for things that I aspire to support.
Jason Hartman 21:52
It’s a question for you before you go, but first, give out your website if you would.
Jeff Fromm 21:56
I’m easily found at Jeff rom com Je FF Fr. Oh, mm, calm. Great.
Jason Hartman 22:03
And, Jeff, just a final question before you go. You know, one of the interesting things we’ve seen in the, in the world of housing that I think speaks to sort of the mentality of the population at any given time. One of the economists that I’ve had on the show many times Harry dent predicted a long time ago, a crash in the you know, what’s known as the McMansion housing market, right, these big giant houses that are much more than anyone needs, right? And I’m just sort of wondering, as we see Gen Xers aging, Millennials aging, certainly baby boomers, aging out of those properties, empty nesters, etc. And, you know, moving to simpler properties to maintain. Do you think the millennial generation and then even later Gen Z is going to come and pick up all these big McMansion houses or I think just kind of their mentality, not going to interest them in that country. Housing song.
Jeff Fromm 23:01
It’s funny you ask the question, because I’ve talked about mcmansions and some of the speeches I’ve given, I don’t think the McMansion is going to make a big comeback, because today’s consumer really wants technology and features. And given a trade off between size and well connected house or a really fancy kitchen, they’re going to go for the well connected house and a really fancy kitchen. So I don’t see a major rebound on the oversized 8000 square foot homes that were built back in the day.
Jason Hartman 23:36
Yeah, so they’re all they’re going to languish on the market is your prediction, but you know, it’s not like that’s a trade off, is it? I mean, the well connected home is not hard to do. You know, you don’t even have to wire any of that stuff in anymore. It’s all wireless. So now if you want to have your lights go on and off or dimmed or be a different color, and I don’t want to say too loud here as we say You can do all this stuff wireless. So big house, small house, not a big differences in
Jeff Fromm 24:06
Well, I think mentally maybe that be maybe true. They’re still the cost of heating and air conditioning and tax and everything else, you know, a gardini. You know, mowing the lawn is still a pretty low tech experience. Let me say this. It’s not something I see as a high probability thing, compared to other things that I think are pretty high on their agenda.
Jason Hartman 24:32
Yeah, I think I have big families. I mean, they’ve delayed marriage. They’ve, you know, some marriages kind of gone out of style in general, but if they’re getting married, they’re getting married late, you know, they’re probably not going to generally have big families. Yeah, so they’re gonna be they’re gonna be small families, you know, one or two kids or maybe no kids, right? Yeah. I don’t know how you do. 1.8. But yeah, well, statistically, you can do it.
Jeff Fromm 25:00
You also have a less of a need around that bigger home. Right?
Jason Hartman 25:03
Yeah, I was kind of looking at that as a result of
Jeff Fromm 25:07
the other. I think as they continue to want to be in suburban areas, by schools when they’re having families that they would have access to public transportation and schools, that will dictate to some extent the size of the home that they can buy proximity to public transportation and school. If it’s bigger homes, then bigger homes will be involved if it’s smaller and smaller homes can be invoked, because location, location location will still be true.
Jason Hartman 25:31
Well, Jay, I hate to keep extending this interview, but I can’t leave that one alone. We got autonomous vehicles right around the corner. And it looks like we’re going to have cheap energy for quite a while, you know, in terms of fuel costs, and electric cars and so forth. So I don’t know, I kind of wonder if maybe there’s going to be a resurgence of the suburbs, because when the future is certainly technology, you know, we can just work at home in general we don’t need to commute anywhere right? Cool again, McMansion. This was not suburbs. Well, yeah, okay, interesting. So they still like having a yard in the suburban lifestyle, but maybe not a McMansion necessarily very interesting. Jeff, great talking to you interesting conversation and I can’t wait to see 510 15 years from now how it all turns out.
Jeff Fromm 26:21
Thank you for your time. All right. Thank you.
Jason Hartman 26:25
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