In this solo episode, Jason Hartman shares updates on the housing market inventory. Then, he talks about an article by Lawrence Yun, Chief Economist of the National Association of Realtors, about an increase in inventory in the housing market. Jason discusses what this current landscape means and why it may not be good news for the buyers.
Announcer 0:02
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 multimillionaire 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 1000s 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.
Jason Hartman 0:53
Welcome to Episode 1676 1676. Thank you for joining me today. I’ve got good news and bad news. Good news and bad news. So do you want the good news first, or the bad news first? Gotta make a decision here. Okay. How about the good news first, you know, always start off with a good news. Right, let’s be done. Let’s be optimistic. And I’ll tell you about the good news. Now, remember, there’s always two sides to every story. Maybe there’s three or four sides to every story. And there are always equalizing factors. There are always winners and losers, there are parties and counter parties. And that’s just the way things work right on every side of a transaction. In a marketplace, you have a buyer and a seller. And so of course, they view things through their different lenses. Right now we have a situation which will come as no surprise, because we’ve talked about it very extensively on the show have very, very, very low housing inventory. And that has been frustrating. It’s been frustrating to you, our listeners and clients. It’s been frustrating to us, because when we don’t have enough inventory, hey, you know, it’s hard to have properties for investors through our network, we could just be a lot less picky. Right? It’s it’s like the old saying, if you can’t be with the one you love, then love the one you’re with. Because there might be a lack of inventory. I won’t go into the inventory situation in the dating and mating market. That’s a different discussion. But in the housing market, the inventory levels are at historic lows, probably the lowest I’ve ever seen them in my career. Of course, that doesn’t give you the whole picture, does it? No, it doesn’t. Because we have to segment that inventory. And we have to look at that inventory by marketplace by geolocation. We have to look at it by price, by housing configuration. Is that a high priced home a low priced home? Is it in a good market? Or a bad market? Is it in a linear cyclical or hybrid market? And what is the configuration? Is it multifamily single family? Is it condo? townhouse single family home? Is it older? Is it newer? Is it brand new? These are all huge differences, right? And that’s why we are here to help you find your way through that maze, talk to one of our investment counselors. And we’ll be happy to guide you through that maze of making these choices.
So here first is the good news. I am reading an article by Tim glaze, and it is entitled housing market inventory is starting to recover. So most people would consider that to be very good news in nearly every market 20% more inventory means 20% more home sales, says Lawrence Yun prior guests on the show and also the chief economist of the National Association of Realtors. In fact, I bet when Lawrence Yun, the chief economist of NAR introduces himself to someone. He says I’m a prior guest on Jason Hartman’s podcast, instead of saying he’s the chief economist for the National Association of Realtors, of course, he would lead with being a guest on my show, right? Yes. Oh yeah, right. Anyway, That’s it really interesting quote 20% more inventory means 20% more home sales, and I couldn’t agree more. Now, last weekend, I spent the entire weekend, three days with my buddies, Ken McElroy and George camel. We had so many meals together, we went to some fun events together. We had some drinks together, we did some impromptu admittedly buzzed live streams from two of the places we were one we were at a bar, and another one. And you can find those on our YouTube channel on my YouTube channel, on the Facebook page, etc. And they’re kind of funny. But they were just brief quickie live streams, you know, 12 minutes or so. And another one we did from a charity event called wings, wheels and passion that was like a fashion show. And they had some private jets there. And they had some super cars that they’re like they had one car that was a two and a half million dollar supercar. And, you know, they had a Gulfstream, a G five jet, you know, and it was fun. We had, we had some fun times, we had so many discussions about this. And if you follow Ken and George, they will kind of profile both sides, the market. But Ken, last year, Ken McElroy, Rich Dad, author of several books, you know, he predicted a housing crash. And then we did a happy hour live stream where we were all in separate places, but kind of did it as a happy hour. Many of you caught that I know, you gave us great feedback on it. He said, Look, you know that crash didn’t come because he didn’t expect this historic amount of money to be pumped into the market by governments, central banks, etc. Right. And so everything just went the opposite way. prices went through the roof, inventory declined. And then he did a recent show, where he really analyzed this inventory equation and talked about well, what if a certain percentage of the people in forbearance don’t succeed in coming out of forbearance, they turn into a foreclosure, right? They don’t sell, they don’t do a short sale, they don’t do a workout a loan modification, they simply end up in foreclosure. And this new housing inventory comes on the market through the foreclosure process. These are all good questions.
But let me just read to you the Lawrence Yun quote again, quote, in nearly every market 20% more inventory means 20%, more home sales, unquote. And what that is saying is that look, if you put 20% more inventory, boom, the marketplace, the buyers will snap that inventory up, there is no problem absorbing 20% more inventory. And I couldn’t agree more. In fact, I would even argue that the number is better than that. And that’s how strong this market is how much pent up demand, assuming interest rates stay near where they are now they could even bump up a little bit. By the way, I’ve got an upcoming story I want to share with you about the change in interest rates and how that has made another 2 million people eligible for refinances to lower their payment by over $300 per month on average, very significant, very significant for the wealth effect for buyers being able to afford more, you know, we’ve seen interest rates bump up a little bit from their historic lows, but then they bumped down a little bit. But right now, if you dump 30% more inventory, I’m going to expand what Lauren says my analysis says you could easily add 10% of that. If you had 30% more inventory in any of the markets we are recommending that you can find at Jason Hartman comm slash properties. You would mean 30% more home sales? Boom, no problemo. No problem. I think problem I was wrong, right? Anyway, no problem. No worries, mate. The market will absorb it all. And that’s true. So this market we’re seeing can absorb a lot more inventory. And the buyers will just snap it up. Maybe the rate of sales will slow a little bit. And it’ll go from depending on the market something like 17 days to 30 days big deal. You can wait 30 days to sell your house.
That’s not bad at all. The question is how much shadow inventory is out there in the potential shadow inventory pipeline, meaning people that are going to put their homes on the market either by choice or through foreclosure. Right, versus the amount of what we’ll call shadow demand. And in my pandemic investing presentation, and by the way, go to pandemic investing calm, if you want the free mini book, it’s totally free, no strings attached, you can just get that it’s just a immediate PDF download of the book, pandemic investing.com, you’ll see some analysis on this, where we basically look at this whole picture. And the demand is just huge. There is so much shadow demand. And this is this really only applies to the markets we recommend. So if you’re working with one of our investment counselors, you know what those markets are, these are these good, solid linear markets that I’ve been recommending for 18 years. You know, I am boringly consistent. I must admit, just boringly consistent, but you know, what works works. It’s not the shiny object. It just works, what we do. And it’s worked for 1000s of people. You can go to Jason Hartman testimonials, and you can watch the videos from so many of our clients and listeners and how they just say all this stuff just works. You know, it just works, right. It’s simple. It’s boring, but it works. And that’s what you want. You want things to work you want simple you want boring when it comes to your money, just boring, consistent, great returns on your money. Right.
Okay, so, just I’ll share a couple snippets of this article right housing starts jumped in March, recovering from a bleak February that included wild winter storms in the south. According to a recent report from the Census Bureau, single family home starts Rose 15.3% over the month, to a pace of 1.2 4 million annualized units. That’s up 37% from a year ago. But it’s important to take into account that the COVID-19 84. You can tell I just added that right. virus took hold on the housing market in March of 2020, said Doug Duncan, chief economist at Fannie Mae, the march pace was the second strongest since 2006, surpassed only by past December’s reading, Duncan said, an extremely tight supply of existing homes for sale, combined with still favorable mortgage rates. And an improving labor market will continue to support demand for housing. suburban multifamily housing construction is also benefiting from this trend. Now, again, we have to segment the market, like I said, when I started talking about this today, and the multifamily is not benefiting nearly as much as the single family. But the demand is so high that even the suburban multifamily market is doing well. Hey, listen, even in markets that are not good places to invest, that people are leaving, that are business unfriendly, landlord unfriendly overprice crowded, crime ridden mass of homelessness problems.
What am I talking about here? While one of these places I’m talking about is my hometown, where I grew up, low single lease, right, the City of Angels? Well, not quite. But the City of Angels, Los Angeles where I grew up, most of my childhood is even benefiting from this. I mean, the market is just red hot there. It’s absolutely crazy. And this is a place that is has diminishing demand overall. But the old saying, the rising tide floats all ships. And that is somewhat true. Now some ships aren’t floating better than others. What are the best floating ships? Well, the best floating ships are the markets we recommend that you find at Jason hartman.com slash properties. But remember, inventory is so low, you must must must be working with one of our investment counselors, because most of the properties don’t even make it to the website. But at least there you can see many of the markets we recommend. Not all of them, but many of them. So remember, I’ve got to give you the bad news at the end of this quote. While housing demand is expected to remain strong, we expected to diminish somewhat as the year progresses, due to the waning effect of COVID-19 disruption to homebuyers purchasing timelines. That’s Doug Duncan. Fannie Mae again, saying that single family housing starts into 2020 on a high note reaching 1.33 8 million unit pace in December. So what that means is, that’s the end Annual number of new homes. I mean, they annualize the figure because it varies so much month to month isn’t very valuable to look at it month to month, you’ve got to annualize it, right? So that’s the annual number. That’s the pace they expect to build. Right? And that’s good. This is the good news. Remember, I told you, I’m giving you the good news first.
But there’s a zinger coming, because the bad news is coming. So get ready. Smile, now, frown in a moment. Actually, in a moment, that’s going to be reverse. If you own all the properties if your portfolio is done, which I don’t know if it ever is, but if you’re sitting back saying, hey, you’ve been working with us for a while, you purchased 50 properties through our network, and you’re done. That’s enough for you. Right? Which, you know, you get kind of addicted to this because it works. So well. Maybe it’s never enough. But if you kind of think you’ve finished building your portfolio, which some people sort of think, look, I’m done, I got my portfolio, and I’m just gonna sit back and reap the rewards from the portfolio. I’ve built these great rental properties. And if you think you’re sort of done, then the end of this, the bad news is actually the good news. But if you’re still in the building phase, the bad news is bad news. And the good news is what I’m telling you now. So it depends how you’re looking at it right? It always depends what side of that thinking you’re on, right? This article just goes on and on and talks about how it’s good news that we’ve got more inventory coming and by golly, I hope the right okay, but listen to this. A reason and I’ve shared this before. This is not new information. If you’re listening to every episode, like you better be listening to every episode. Our recent report showed that the current price of lumber and building materials is adding approximately $24,000 to the cost of new builds, forcing prospective buyers to abandon new builds and focus on existing properties that’s depleting inventory across the country. there continues to be a demographic fueled shift away from renting to homeowning, driven by millennials aging into homeownership. But the challenge is the historic lack of supply.
Now, don’t take that comment at face value. Because they never asked the Jason Hartman question. What did they never ask? They never asked compared to what? Right? See, that sounds good. It sounds like all these Millennials are buying houses. But compared to what compared to the size of that demographic. Millennials aren’t really buying that many houses at all. In fact, they are prone to be renters, because they already got a mortgage by going to college and getting that silly liberal arts degree that nobody’s hiring for. They got a mortgage, it’s called a student loan. Sadly, they just didn’t get a house included with it. And that is a monumental scam. And these universities and these companies that put these students into debt, and the government mostly should be absolutely ashamed of themselves for causing this student loan debt problem. It’s an absolute disaster. And it causes increased demand for our rental properties. Because these millennials, they’re not buying homes in any big numbers as that statement would imply. Yes. In the aggregate, the numbers seem large. Yes. They’re aging into homeownership. Sure. Milena, the oldest millennials, like 40 years old now. They’re not kids anymore. But compared to prior generations. They’re renters. Because they like that mobility. They like the freedom and hey, they like avocado toast. Remember that meme that went around because some millennial said I’d rather have avocado toast at a restaurant for $16 then buy a home. Millennials are, you know, instant gratification generation and hey, you can’t blame them. Why wouldn’t they be? They’re the most catered to coddled generation of people ever in human history ever. I mean, wow. Absolutely. So are you ready for the bad news? The bad news is this. Well, this article talks about how builders are finally building more. Yes, the price of that new construction is a lot more expensive because the lumber prices have gone up so much. We got it. They’re talking about how the inventory problem is going to recover. It’s going to ease a little bit there’s going to be a little more inventory. But what they never tell you what they completely miss. As I would say you can’t hear the dogs that don’t bark Here’s the dog that’s not barking. And it’s the bad news for people building their portfolio. virtually none of this inventory, like Zilch, zero, nada, nothing. Almost none of this inventory is in the price range. That would make sense as a rental property.
This inventory is going to be six $700,000, maybe more. Some of it’ll be a little lower. Sure. But nobody’s building brand new $150,000 properties that make sense as rentals. They’re just virtually non existent. There’s the bad news. That’s the bad news, if you’re trying to build your portfolio. So if you think you’re going to sit back and wait for the dip, right. Good luck. I just don’t see it coming for a while. Yeah, it’ll eventually come. Sure. There’s always a cycle. You know, even the tulip bubble collapsed, right there as it should have, it should have never happened in the first place. Everything has a cycle. There’s always a business cycle, right. But folks, it’s just not on the horizon yet. For these low priced affordable housing rental properties. There’s just nothing coming. There’s no big solution. No, it’s not 3d printed homes. No, it’s not manufactured housing. There is literally nothing that anybody can see on the horizon right now. You think I’m wrong? Tell me I’m wrong. Go to Jason hartman.com slash ask. And instead of asking a question, tell me I’m wrong. Tell me if I’m missing something. Just don’t see it. I spent my whole life doing this. I don’t see any relief coming for affordable housing. The problem is only getting worse, in terms of in what I mean by worse, is less inventory. But for you, as investors, this is good news. It’s really good news, because it means rents are increasing. And by the way, rents are increasing. Our team was talking about that this morning. And our investment counselors were chiming in on that. And let me tell you, there is like no relief for the rents they are going up, up, up, up up, prices are going up, up, up, up up. But the houses are still cheap when you compare them to other things. And especially when you compare the monthly mortgage payment to other things. And when you ask yourself, Is it cheap? Or is it expensive? It’s still cheap. And that’s why the demand is so high, and the prices will keep rising.
Okay, folks, if you need us reach out, Jason hartman.com. We’d be glad to help you with any questions you need. Our investment counselors are standing by for all of that they can also share with you various webinars and web classes that we have that can help you with anything from asset protection questions and strategies to different markets that we’ve got that we’re recommending interviews with our local market specialists there, and all kinds of great resources. So it’s not just about properties, your investment counselor at our team, and you can reach them by phone to one 800 Hartman in the United States one 800 h AR t ma n, or through Jason hartman.com. And they’re happy to help you with all sorts of resources in terms of building your team resources for 1031 exchanges, financing, we’ve got some great new financing people on board on our team. So check that out. And they’re just here to help with anything you need doesn’t need to be specific properties or anything like that right away, so be sure to reach out to them. And we will talk to you on the next episode. Until then, happy investing.
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