While celebrating the Thanksgiving holiday, Jason Hartman visited his mother’s home and during a glance through old books of his, he revisited two of them that had a significant impact on the beginning of his investing career: The Art of the Deal by Donald Trump and Mission Success by Og Mandino. Hartman explains why both books had such an influence on him and why he still reflects on them today.
He invites the President of Meyers Research, Jeff Meyers, to this episode of the Creating Wealth podcast to talk about the housing market across the country and the state that it’s in, as well as how much runway the market may have. They also discuss the issues with millennials buying homes and whether a change is expected, as well as the self-driving car and the impact it stands to have on society.
The Art of the Deal
Over Thanksgiving weekend, Hartman visited his mother’s southern mansion and while he was looking in her bookshelves, he came across a couple of books that he used to read. One of his finds brought back memories of his first read of it, during a Caribbean cruise when he was twenty-four years old. At the time, he was a RE/MAX realtor. He stepped into the real estate business at nineteen, bought his first property at twenty, and formally moved out at twenty-two.
At the time, he was showing a good deal of interest in becoming an investor rather than a broker, and this book that Hartman read was written by a man that made quite a name for himself in real estate investing. He’s potentially the most well-known real estate investor in recent years, not because he’s the best, but because he’s the most publicized.
Hartman states that The Art of the Deal by Donald Trump had a significant impact on his life, influenced where his career was going. While on the Caribbean cruise, traveling to islands and meeting people, Hartman still found time to become engrossed in the text.
Og Mandino’s Mission Success was another of Hartman’s favorites at the time. He recalls that there was a section in this book that called to him, a poem called Seeds of Success. Hartman used to drive around and listen to the cassette tape of Mission Success on repeat. He compares Mandino’s work to coming close to those of his four great mentors due to the impact it had on the way he understood and felt inspired by it.
Recently, Hartman has been listening to The Art of the Deal on audiobook, recalling the influence that it had on him. In a section of the narrative, Trump talks about a deal he made with Walter Hoving, a Swedish-born businessman and chairman of Tiffany & Co at one time. He mentioned what an honorable man Hoving was, because he had the upper hand on Trump and could have taken advantage of him during this particular deal, yet he did not.
“A gentleman is someone who has the advantage but doesn’t take it.” Hartman says of Hoving.
Relating to this quote, Hartman mentions that it’s a true rarity to come across people that do not want to take advantage of others. So often, people believe that there is always more people available, so it doesn’t matter who we step on. Hartman advises avoiding this, taking time to build a number of loyal fans and customers, taking care of the ones we have so that we don’t have to try to replace them when we’ve done them wrong.
He also mentions that Walter Hoving had some very interesting writings about a number of topics, including capitalism, education, employment, inflation, and more.
Introducing Jeff Meyers
Hartman recalls meeting Jeff Meyers when he was younger, almost thirty years ago. He became his realtor and did a good deal of business with Meyers over the years. He states that he enjoyed learning about Jeff’s insights and business acumen.
Jeff Meyers of Meyers Research will be speaking at the upcoming Meet the Masters of Income Property event. John Burns, another Meet the Masters speaker, used to work for Meyers. The men are two of the leading players in the field of real estate market research.
Tickets are still available for purchase and upgrade at jasonhartman.com/masters. VIP and Elite tickets will have the opportunity to meet the speakers in the green room, have photo ops, and Elite tickets will also be invited to the exclusive Ron Paul dinner.
Walter Hoving and Capitalism
Circling back to the writings of Walter Hoving on capitalism, Hartman states that Hoving claims capitalism is the only true economic system. Socialism, communism, and fascism are political systems more than anything else. In some countries, capital is owned by the government, and in others, the capital is owned by private owners. The only capital that produces prosperity is one that promotes the freedom of citizens.
Hartman mentions having visited eighty countries in his lifetime, and some of them were communist or former-communist countries. He’s been to Cuba, Romania, Russia, and Eastern Europe and during those trips he talked to many different people about communism. He states that people in former-communist countries recalled waiting in line between 18-36 hours to purchase a pair of shoes, rations, food, or anything that the government was willing to provide to the people.
A guide he had in Romania said that after the many hours of waiting, there were plenty of times that when the time came to purchase a pair of shoes, they’d be out of the desired size. To fix the issue, Romanian people would get together and trade their shoes so that each person would have shoes that were a little closer to their size.
Hartman states that there are a good deal of people that want to bring communism to western countries, to try it again in the hopes that it will be different this time around. He asserts that it will not be different in any aspect, because the rules of communism remain the same.
He mentions that capitalism is always working behind the scenes. We are all capitalist people by our very nature. It doesn’t matter which country we live in, we all have capitalist desires. It isn’t a perfect system, but thus far it has been the best at distributing resources to the people.
Millennials and the Housing Market
Jeff Meyers is the founder of Meyers Research, as well as the developer of a real estate application by the name of Zonda. He is the leader in the field for real estate market research.
He states that there is a strong market across the country. Prices have continued to increase, and secondary markets are also taking off as millennials and first-time home buyers are entering the market. Rents are increasing over the past five years, playing a part in the increase of people seeking home ownership.
Meyers states that there are about 80 million millennials in the US, and many of them have a student debt average of $30,000, the highest average in generations so far. It’s important to consider the life-stage that these young people are in. They’re planning a future, and at first, they’re satisfied with having a small space for themselves and a dog. The plan develops into partnership and expecting children. Because of this, prepared millennials are looking at schools and the neighborhoods surrounding. They’re desiring single family homes in neighborhoods with strong school systems. Though they are taking a longer time to leave their primary homes than past generations, it’s happening slowly.
He outlines the type of buyer a millennial person seems to be. They accept what they can afford, but desire to stay closer to their places of employment, rather than far out with long commutes.
Meyers mentions that his general outlook is cautiously bullish. It’s been a long recovery from the recession and housing has not led this recovery. Because of this, there is still some runway on the market. Core markets have gone up significantly, with 20-40% average increase over previous peaks, while there is still runway in the suburbs.
In his research, Meyers states that he covers about 75% of all new housing, the majority of the new home market. He mentions again that the suburbs have a long runway in terms of home prices because they haven’t been kept up.
Faulty mortgages drove the market down almost 70% in Las Vegas during the recession, something that we haven’t seen before or since in the real estate market. Meyers states that other markets have come back, especially close to employment properties, which have recovered rapidly.
Recovery from the Great Recession
Hartman asks that, because of the length of the recovery, if Meyers sees another recession looming in the near future. The US is recovering from the worst economy we’ve had in seven decades. He also inquires about when the recovery technically began, if it’s fair to use the turn of the market as the beginning of the economic recovery, or if it truly started in 2012.
Meyers explains that in looking at housing prices over the past 50-75 years, we have experienced the first double digit decline during the recession. In California, the housing prices constantly increase, and have never had a two-digit low. Even in prior recessions, we have not seen 10-20% housing price declines.
He reminds listeners that faulty loans were the cause of the recession, and that housing is not going to cause it again. It’s not likely that we will experience the same declines.
Tight Mortgage Lending
Hartman agrees that banks are much more conservative with lending this time around and notes the absurdity of the loans in 2000-2005 when the banks were clearly giving loans to people who could not maintain them or pay them back.
Being approved for a loan is much tougher, being that they want credit scores of 720 to approve a loan. The mortgage regulations are tougher than before, and underwriting is now very difficult. Because of this, the default rate is now the lowest on record. Even in high flying markets like California, even if the demand were to weaken, we still would not see double digit declines in that market.
Impact of the Self-Driving Car
Hartman states that the self-driving car stands to be a game-changer for real estate. As of now, location is an important factor in real estate, however, geography is less meaningful than it has ever been. It still matters, but Hartman predicts downward pressure on prime location real estate and upward pressure on lesser prime real estate locations. There may be a resurgence of the suburbs with no burden to drive anymore. Time can be saved during the commute to work, as commuters could very well sleep or work in their self-driving cars during the trip to work.
Meyers believes that self-changing cars could change everything, like the way that Amazon’s distributions changed retail as we know it. Retail malls are dying out, and retail has changed to where demand won’t be so great.
The self-driving car could change the way we drive and the way we park our cars, including garages. Amazon has actually designed their parking garages to have ten feet of clearance just in case there is no longer a need for garages, and the buildings could easily convert to offices.
In real estate, a garage is a big part of a home’s design and with the development and availability of self-driving cars in the future, it might not be. This opens up a lot of opportunities for housing development.
It’s quite possible that remodeling unneeded garages could become a cottage industry. There won’t be a big need for driveways, and even the demand for standard-drive cars may go down.
Coming to a close, Jeff Meyers mentions that building is one of the last industries to be disrupted by technology, and wonders if there is going to be a 3D printer that builds houses in the future. He wonders about who the Elon Musk of home building is going to be and declares that there may soon be a more efficient way of putting homes together.
For more information about Jeff Meyers and Meyers Research, visit meyersresearchllc.com, and check out his Zonda application for IOS.