Jason Hartman is back with Adam today to discuss Fannie Maes Chief Economist Doug Duncans latest comments about the housing market. They discuss the huge lack of housing inventory and its impact no the market. Later on the show, Jason brings on Ingo Winzer, founder, and president at Local Market Monitor. They talk about how Local Market Monitor analyzes 300 local markets and what’s important when looking at potential markets for real estate investing.
Investor 0:00
Thanks for your support. Jason, I appreciate your support and your whole network. It’s really been very beneficial to me and, and a whole lot of others. I encourage everyone to use your resources that you have. But thanks, thanks.
Announcer 0:12
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.
Jason Hartman 1:03
Welcome to Episode 1275. This is your host Jason with a very rough voice so please excuse that. I’ve got Adam here with me for the intro portion of the show. And then we’re going to talk with Ingo Windsor today and interesting interview about monitoring over 300 local markets. Yesterday for the first time ever, I decided to give my voice a complete rest for the entire day. I hardly spoke five words the entire day. And it was it was really nice actually was like being in a Silent Retreat. So anyway, Adam did the show. Good job yesterday, Adam.
Adam 1:43
Well, thanks. I knew it was bad when he started sending me texts instead of
Jason Hartman 1:48
I don’t like to type very much. So today we’ll jump into a really good interview here in a moment but with dodging the hurricane and I guess it just got a little much and I got a little bit sick. I you know, it’s a Interesting. I was sick last year one time and December and then, but really I escaped being sick for quite a few years. Sort of. I don’t know, maybe maybe I gotta pay a little more attention to the the germs. You know what we’ve got to do in this world we’ve got to stop shaking hands. I mean, it’s a polite gesture, but it’s really impractical. Talk about the spread of cold and flu viruses. Wow, I
Adam 2:23
need to start doing some forearm bumps or fist bumps or something. Oh,
Jason Hartman 2:27
I think we should do like the Japanese do and do that bow. I think the bow is really quite nice. highly doubt that will catch on here. You don’t think it’ll catch on? Americans? Yeah, I thought it’ll catch on. But it’s really nice. You know, when I went to Japan, they kind of bow at you and it’s very courteous. I like it. Anyway, hey, so before we get to today’s interview, Doug Duncan, the chief economist for Fannie Mae was quoted in an article on housing wire that really I think just nails it. I mean, we’ve been talking about this quite a bit. And it is the point that one of the biggest challenges with the housing market, and what is causing sales to be slower than they would, is simply lack of inventory. If there are no homes to sell, you’re not going to get as high as sales rate. And that’s going to reverberate through the economy in lots of different ways. All of the appliance manufacturers, all of the construction workers, all of the people employed around the housing industry, it is just a giant, giant industry. So Adam, let’s dive in and take a look at this article where Doug Duncan really points out a very, very significant thing, and I don’t think we really need to worry much about what he says about mortgage rates in the past two weeks or anything, but you know, they try to stimulate the market with low mortgage rates, and that’s fine to a degree, but it doesn’t solve the problem. If there’s no inventory. All it does is cause prices to go up radically. As we’ve seen, we need more inventory.
Adam 4:04
Yeah, he’s talking in here. And he said that annually, we’re producing 300,000 less units. So single and multifamily housing, then we should give in our current profile. That is an enormous number.
Jason Hartman 4:17
That is a huge deficit. 300,000 homes and by the way, some experts say that’s five or 600,000 homes less than we need. These are not exact things that you can determine because you have to take into account the population, the housing demand, the various demographic cohorts and the inventory, the housing stock that already exists, that really needs to be replaced. And when you’re starting with the terrible number, It’s never good to go and go on from there. Well, you but if you want, if you want the truth, that’s what you need to do. And you know, a lot of these markets that we go into around the country, I mean, this housing stock is just aging, aging, aging, and it really needs to just be ready replaced many times we postpone necessary replacement of that housing stock. And I’m just saying we as a, you know, as a society as the market. And what happens is, you know, sadly, we’ve seen and I just saw a video that was just tragic about what happened in the Bahamas with Hurricane Dorian, you know that we’re forced to replace this housing stock by a natural disaster. So it’s a significant problem, this inventory shortage,
Adam 5:26
and we have the boomers who are aging in place, like we’ve talked about before. And we have Gen Xers who are aging, quote, unquote, in place, but instead of doing new construction, they’re just going up. You know, they’re tearing the other adding on another floor, or you know, maybe a backyard apartment or something like that. But they’re not selling their house. They’re doing mini construction rather than new construction. For that property. They’re adding an extra room or whatever.
Jason Hartman 5:53
So let’s talk about the boomers for a moment and the aging in place issue Adam because that is hugely significant. You know, a lot of our listeners have asked me over the years about assisted living, and, you know, basically nursing home facilities and buying properties to use as assisted living. And I looked at that in detail, I went to a weekend seminar, where we went out and visited some of these properties that was in Phoenix, Arizona a few years back. And I’ll tell you something, that is, as I’ve said before, this is not new information. Number one, the graying of America has been a trend that people have been seeing for decades. It’s not like it’s a surprise. So the supply has been factored into the market largely, number one. And number two, the promoters of these assisted living properties. And you know, I know many investors who have invested in them I personally have not have highly, highly, just terribly over simplified the whole concept of running an assisted living facility. I mean, the demands and the liability With insurance and cities and the regulatory environment, it’s just unbelievable. Yes, money can be made and everything. But you better plan on being an expert. And you better plan on lots of obstacles and hurdles. I just see these promoters out there just massively over simplifying this. And, you know, caveat emptor, let the buyer beware, once again,
Adam 7:25
yeah. And we were talking about how, you know, the huge number of 300,000 less units per year being created. They’re saying this aging in place for the boomers and some of the Gen Xers is keeping 1.6 million houses off the national market. You know, when you start adding all of these numbers together, it just keeps getting bigger and bigger. And it’s just a really deep hole that we’re going to have to dig ourselves out of, if we’re going to get back to affordable housing for people.
Jason Hartman 7:53
Yeah, well, it’s even more amazing than that. Because Now granted, there’s always a bit of a disagreement as to exactly when various demographic cohorts start and and you know, the birth years, and so forth. But many would say that baby boomers are between 1943 and 1960. That’s the year they were born. Right? And before that is the silent generation, okay, that the demographic cohorts and then after that is Gen X, my generation and then and then your generation, the millennial generation, Adam, what you see is even more significant than that my mother is not a baby boomer. Okay. She’s part of the silent generation, the older than baby boomer generation, and she’s aging in place. Okay. She’s not moving into, you know, assisted living facility or anything like that. Same with my aunt who’s been on the show. And, Joan, same thing. You know, these people, they don’t have help. They’re independent. They live in their own house. And so when you talk about baby boomers aging in place, the silent generation is also aging in place. All right, it’s Yeah,
Adam 8:58
yeah, and especially as lifespan. Well, hopefully, as the lifespans keep getting longer and longer, we’re going to have to shift when we expect people to start moving out of their house and into facilities. Because I mean, it’s as it bumps back, we can’t keep looking at the same data and thinking that it’s not going to change as the longevity of the United States and the world changes.
Adam 9:21
Yeah, I haven’t
Jason Hartman 9:22
seen a whole lot of that going on. Well, yeah. So So lifespan, and also, as we’ve talked about before health span, so you’ve got the greatest generation, which it probably, you know, almost all have passed on the silent generation still even many of those aging in place, and the baby boomers. So this whole assisted living thing is just, it’s just kind of overpromoted and overrated a bit. Yeah, a lot of it’s been priced into the market. And when something is priced into the market, the opportunity dissipates. So once again, good old fashioned normal, long term rental homes are That’s a great thing and income property or not income property, but real estate in general, whether it be, you know, house you’re looking for for yourself, or a rental that you own or an apartment, you’ll just see that scarcity is just built into the equation. And it’s such a great asset to have because think about it. Some of you listening own your own businesses, of course not if but you do, and you sell a given product. And the likelihood is that you have to go out and market your product or service. But real estate takes hardly any marketing at all. You just do what my mom does when she over she rents one of her house and she just sticks signs up. Okay, you know, she’s the extreme do it yourselfer, as I call her, and she put signs up in the world beat a path to her door. It’s just amazing the level of scarcity. And that is great for us as income property investors but getting in the game, you’re going to think Gosh, these properties are so expensive. They were so much cheaper 10 years ago, eight years ago. Yeah, I know. I was there. Okay. I was there. Listen, I was also there in the 90s. They were cheaper than two. Okay. And in the 80s. And in the 70s, they were even cheaper than that. And in the 50s and the 60s, you know, if you want to see how significant this is just read, good old William Nickerson his books, okay. Bill Nickerson. And, you know, he’s sort of the original real estate investor, Guru guy, right. He wrote a bunch of books on investing. And, you know, he talked about prices, like, late for it. I had to pay $8,000 for this rental property. You know, $9,000 I know. And these are not seaglass crappy properties he’s talking about either, okay, you know, these are decent properties and in decent neighborhoods with reasonably low crime rates back then. So It’s just the scarcity equation is just built in. It’s such a wonderful asset class.
Adam 12:05
Yeah, and especially the National Association of Realtors saying this lack of inventory has actually caused 93 out of 178 housing markets to appreciate 5% or higher in the second quarter. So I’m assuming that’s year over year based on this but I mean, it’s
Jason Hartman 12:20
only if that’s in a quarter that’s really amazing.
Adam 12:23
I’m gonna assume it’s
Jason Hartman 12:24
your year it’s probably year over year it doesn’t say that but you know, certainly 5% appreciation and way more than that has happened in a quarter so yeah,
Adam 12:33
and get and guess what the chief economist of the NAR says we should do in order to prevent greater price appreciation. What does Lawrence Yun say? shockingly. I mean, this is gonna blow everybody’s mind. He says we need to bring more homes to the market. Jason it’s just it’s that simple. Oh, yes, it is. That’s what we’ve been talking about. Need more inventory. Boy, you gotta do. Yep, that that is all you got to do. But it’s hard to do that with the environmental restrictions. The cost of construction. Now let’s talk about one more thing before we get to our guest. And that’s the labor component that has been really hurting the housing market, right or hurting the inventory, in turn the housing market, this labor shortage, right? Right. The number of units being built a year kind of blew our mind. It was back before the Great Recession, we were looking at 2.2 million units a year being built, and that is dropped all the way to 600,000. And it stayed that way for a while. And he said the one of the bigger problems as we try to ramp back up is that those workers who built 1.6 million homes, either retired, went back to their home country or said you know what, construction isn’t sustainable. I’m going to go find a job in a different industry, you know, maybe becoming handy men or gorgeous, something else. Anything else, all the other going back to school, getting into student loan debt, who knows? But they saw the great recession and said, You know what? home construction isn’t as safe as I thought it was. I’m going to go do something else and It’s going to take a while before you can convince the number of workers it takes to build 1.6 million houses to come back.
Jason Hartman 14:06
And this is why, as I talked about the other day, by the way, I hope by Monday’s episode, my voice will be normal folks. So please excuse it. This is why my interview that we just published with Chris Porter at john burns, real estate consulting, it really just, I got to drive that point home again, we have got to start accepting as normal and good manufactured housing in this country houses. I mean, not all of them, not the whole house. But the components of houses should be built in factories on assembly lines, and moved to construction sites. The idea and Chris and I joked about it the other day on that episode, that we say that the biggest innovation and home construction in the last hundred years has been the nail gun. I mean, that’s almost true. It’s kind of snarky, but it’s almost true. You know, it’s just reading It was that we’re still building houses the same way, pretty much pretty much the same way for the last hundred years. There’s hardly any difference. We need to be building houses in factories, it can be done much more efficiently and much less expensively. But it just, I don’t know why it’s just it’s sort of a mystery as to why it doesn’t really happen. If anyone has an opinion about that, or any thoughts on it, please go to Jason Hartman comm slash ask and tell us what you think we’d love to hear from you Jason Hartman comm slash ask. And the last thing before we get to our guest is remember the contest? Okay, we are doing a contest make your videos, we talked about that on a prior episode. You can win some great prizes, tickets to profits in Paradise, and the grand prize bonus, being a free cruise. Okay. So be sure to join the contest and let’s go to our guest it’s my pleasure to welcome Ingo Windsor To the show, he is the founder of local market monitor, as you’ve heard me say many times over the last 15 years, all real estate is local, all real estate is local. And that’s what we want to do on this show. We want to drill down to help you understand on unravel what is going on on a local level, rather than the amateurs who talk in sound bites in the major news media. Talking about the US housing market. I just don’t know where that is. There’s about 400 markets around the country. Let’s dive into some of them. It goes company covers about 320 of them. I believe, Ingo, welcome. How
Ingo Winzer 16:35
are you? Jason? Thank you very much. Yeah, we covered 320 markets. We don’t go all the way up to four, because there’s not all the data we like on all the markets got it.
Jason Hartman 16:44
Well, hey, give us the broad view. And let’s kind of go down the funnel, if you will. Let’s look at some markets, but what’s going on on a national basis?
Ingo Winzer 16:53
Well, it’s interesting because obviously, very recently, people have been talking more and more about the possibility of recession or least have an economic slowdown. And that’s going to have an effect probably on real estate in all markets. Now it’s going to have gonna have effects in different ways depending what kind of a market you’re in. You know, there’s some markets where over the last few years real estate has been hot. And we’re pricing up and going up very rapidly and probably are close to peaking, we’ll have to find out what happens about the local economy and those markets and with the national economy to figure out what’s going to happen with prices in those markets. Once they have picked, will they go down as it did in the in the 2008 recession, I think that happened to be an anomaly prices sometimes go down, but they don’t always go down in all markets. So this time around, we’re going to we’re going to see different kinds of price movements in different kinds of markets. So depending on the market you’re in, you may be facing greater risk or the risk may be relatively small,
Jason Hartman 17:54
right. And you know, one of the other things we should point out and we kind of just mentioned this briefly before, we started today is that another amateur thing that goes on in the mainstream media is that they only talk about prices, appreciation depreciation. And for the income property investor, it sort of leaves them loss because, you know, we want to talk about income and rental data too. And you cover that a little bit. But you don’t love the data, you get right. speak to that for just a moment, because it’s obviously a multi dimensional thing, right? It’s not just about I mean, with, you know, my portfolio, I really wouldn’t care if prices went down. I’m just all about buy and hold and I’m investing for income. But hey, if they go up, I’ll take it. It’s better.
Ingo Winzer 18:44
Yeah, yeah. No. Yeah. Well, one of the things we do look at it at is rent data. And unfortunately, it’s data that comes from the government. So it is comprehensive data. It’s good data. The promise is always a couple years old. By the time we what is
Jason Hartman 18:57
that data tell tell us how what’s That data comes from why it’s old. Let’s talk about the rental side of it a little bit because it’s it’s tough. Yeah,
Ingo Winzer 19:07
as you’re saying the rental sub is really interesting because rents behave differently than prices. You can be in a market where prices are soaring rents tend to move along with income, rather than with shortages of housing. So you know that the rents will rise a bit if prices are rising very rapidly and sideways. They rarely rarely fall. You know, even even during the recession, this past recession, rents in some places fell, but not a whole lot much. So now, they behave differently than home prices, which is good and bad. It’s bad in the sense that, you know, in a hot market, you’re not going to see rents rising 10% a year. On the other hand, you’re also not going to see him falling 10% a year. So this is one of the reasons why rental property is such a good deal because it’s actually a relatively low risk investment that
Jason Hartman 19:52
it is as long as you’re not investing for appreciation as long as the listeners follow my commandment number five Thou shalt not gamble. You’ve got to buy the property that makes sense the day you buy it. And if it doesn’t make sense the day you buy, you don’t buy it. Otherwise, if you do, just understand you’re being a speculator, okay. You can take, you can take 10% 20% of your net worth, if you’re wealthy and speculate, fine, you might win, you might not, but it won’t change your lifestyle. Now, the other thing I want to say about that, and you you put it so well make sure listeners you go to Jason hartman.com. And in the search bar type in the three dimensions of real estate, the three dimensions of real estate, where I unpack what Ingo just said a little bit more as to how many times rental income and prices will be non correlating indicators, they’ll just do the complete opposite thing because in a hot market where prices are rising, everybody wants to buy they want to get out of the renter pool. And so you see these low rates the houses are very affordable, the market is hot, the renter pool shrinks. In the other side of the market where affordability is low times are bad, as most people would say. And it’s a buyers market, you know, people just stay put they rent, sometimes they lose their house through foreclosure like they did in the Great Recession. And then there’s even more renters and the renter pool. So it’s an interesting thing when you look at comparing rents to prices, right?
Ingo Winzer 21:20
Yeah. And then one of the things that people don’t appreciate is how much the entire environment for renders is changing because of the economics of the US economy. The economy is creating more renders because fewer people have the amounts of money that they need to buy own, partly because of large amount of student debt that younger buyers are holding. And also because in large markets, there is a greater share of jobs moving into the larger markets. One reason is that there are greater efficiencies for healthcare providers, and for other kinds of businesses to concentrate in markets that already have a concentration of stuff. So you’re seeing in some markets, a growth in renders, and other markets, smaller markets and more what used to be industrial markets, you’ve seen the opposite, that there are fewer renders. So the whole dynamic of renting is changing for from what it used to be, and people need to be more aware of what’s going on with it. Yeah,
Jason Hartman 22:17
very good point. And, and, you know, the demographics of renters are changing the, you know, we’ve seen aging baby boomers who are more than happy to rent, which is a surprise, usually they all want to be homeowners and, you know, pay off their mortgage and stay in place as long as they could. Right. So yeah, it’s kind of a really a different dynamic. Okay, that rental data, though, where does it come from? You know, is it Yeah, tax returns? Certainly, when you look at multifamily housing, there are a lot of companies out there that just survey apartment complexes and ask them what’s going on, you know, they come issue surveying, you know, what are you getting?
Ingo Winzer 22:55
This is one nice things about the US government, it actually does do surveys. Every year and then obviously, you know, every 10 years desensitizes to in a more detail basis. But every year all the time, let’s put it this way all the time. The census is doing surveys all across the country, calling people up and talk to them in detail. But you know, not in not in the interest of detail about our your render or you’re homeowner, if you’re a renter, how much do you pay per month, more or less? You know, they don’t ask you precisely to give you ranges in which you can give you answer. But basically, the government does gigantic surveys. It’s free to us, we don’t have to pay for it. We’re paying
Jason Hartman 23:33
for it. Trust me.
Ingo Winzer 23:35
We’re paying for it. We are thanks. But that said that they don’t charge us extra for that. The services are all over the commander den down to the zip code level, which is really, really interesting. You know, because you’re not going to get detailed data like that from anybody else. So data is good data. And one of the other things I do want to mention, because we’re spending more time looking at this is that then within smaller market areas, like zip codes that they tell you, you know, within different groups, how many people are paying this much rent? How many people paying this much? This much right. Now, one of the things you don’t know is, you know, are these apartments? Or is somebody renting a single family
Jason Hartman 24:10
home? That we don’t know, but they give you market segmentation? So that’s great
Ingo Winzer 24:14
market segmentation. Yeah. And it’s, you know, and the data, the smaller the market that you’re getting distribute data for, in large markets, they can they can tell you what’s going on a year ago, okay. in smaller markets, they sort of have to aggregate data from several years, and they try to adjust for the effects of inflation, etc. But, you know, you have to understand what the data tell you, you know, how the data are required to know what the data actually but it’s but it’s pretty good data, you know, that the as I said, the difficulty is that it’s always a year older. So, so we don’t know exactly what’s going on, right. But it’s extremely comprehensive data. You know, there’s a really good service and it’s statistically very, very reliable data.
Jason Hartman 24:54
So it’s old, though it’s a couple years old. So it’s not ideal like the same Thought it sales data is a lot better. Okay, so let’s go back into the sales. And let’s look at what your forecasts are based on. Are they based on? They’re based mostly around the concept of employment, right jobs, job growth. Tell us about that.
Ingo Winzer 25:14
Yeah, we do forecast prices in all the markets that we cover the 320 markets, and then also four counties and limit per zip codes, but I wouldn’t, I wouldn’t place my money on those forecasts. I’ve done this by looking at lots of data over the years. And that’s one of the advantages of having been involved in this for 30 years. You see what things happen? And what things don’t happen. The forecasts are largely based on wherever prices now, how much did they change over the last six months, that gives you some idea of where prices are going because prices tend to move in is smooth. A lot of stock prices drop one day they’re down the next day, prices tend to move much more slowly and different sort of predictably. So even without anything else going on, you know the price started going down in the market, you’re pretty darn sure they’re going to keep going down and on the upside And then we modulate, but at some point that
Jason Hartman 26:03
flips, you know, whether they’re going up or down at some point flips, obviously. Yeah.
Ingo Winzer 26:08
Right. And one of the things we want to know is what is going to affect that? How is that going to change and jobs? We found over the years is a very good predictor. It’s a very important input into any home price forecast. And then also, you know, we have to look at what kind of a market is it a market that that tends to be volatile? Or is it market where everything’s always, you know, going pretty smoothly. So you know, the type of market, what’s happening with jobs, what’s happening with with income to some extent, you know, the income data is also old by the time we get it. So you want to be as recent as possible. That’s why jobs are such a good indicator because new jobs come out every month.
Jason Hartman 26:45
Okay, so unpack the jobs thing a little more, though, you can’t just say jobs like what does that mean? Is it job growth? You know, I mean, you can dice the job thing a zillion ways to Sunday. Right? Right. So
Ingo Winzer 26:58
tell us more. Yeah, let me find out. is the best indicator for what’s going on the local economies, how much jobs have changed in the past year. So right now we have job data for for July. And we compare it to what what the job they were a year ago, and you look at the percentage change. So it might be a 1%, increase 2% increase in some markets, it’s a 1% decrease, and you start charting those data, then you see patterns, you see, oh, you know, the economy’s doing well, or poorly, depending what’s going on with the job data. So yeah, the change in jobs. I mean, that’s, you know, it makes sense that that jobs would affect what’s going on, or what is going to happen with home prices and endless rents. Because in a market where jobs are growing, you know, there’s always going to be jobs create demand for real estate, and in any market because it takes a long time to build real estate. You know, the demand is always ahead of the supply. So, you know, unless you happen to be in a market where it’s been over build, the demand is always ahead of the supply. So if you know that the demand is going to be greater because that’s going into markets and for investors, there’s just this beautiful scarcity built into housing, the demand is always ahead of the supply. And that’s wonderful when you own the properties. So yeah, you know, when you’re a buyer of them, you’re going to feel like, Well, you know, I just can’t get the deal I want to get right. But those deals always tend to look pretty great in the rearview mirror when you just wait a little while so yeah, good point. What else should we know? So jobs, anything more you want to say about the jobs component? Well, yeah, we’ve talked about local jobs and local jobs can be of various sorts, they are there, you know, in a lot of markets, but you have to look at the kind of jobs that are going there in some markets, let’s say in Seattle, everybody’s working for a high tech company. Yeah, they’re, they’re making lots of money, you know, and they’re probably going to be homeowners, and a lot of other markets, let’s say in Las Vegas, most of the jobs in the services sector, and those tend to be low paying jobs. So those people are likely to be looking for rental properties, you know. So in different markets, depending on where the concentration of jobs is, or what let’s say which jobs are growing the fastest. For example, these days, a lot of the new jobs in the economy are in, in healthcare, and in business services. And they tend to be lower paying jobs than the old jobs and manufacturing, which used to be driving real estate demand 3040 years ago. So it’s new types of jobs. And in those markets with a lot of health care jobs, for example, it’s a much better place to be looking for rental property because those people want to rent. So
Jason Hartman 29:39
are you saying they want because they move? I mean, there’s the old thing about the nurses. There’s even a name for it. I can’t remember where they stay on for a certain amount of time, then they move somewhere else. Yeah, yeah. Is that what you mean? So So you’re saying that healthcare is a transition industry, and that’s good.
Ingo Winzer 29:54
Well, it’s a growing industry. Now. Also, it also depends what kind of jobs in healthcare Health here, if you’re a well paid technician to you make, you know, make enough money to buy a home. If you’re a nurse’s aide you don’t. So you do have to look at what kinds of jobs are being created in a local market to to get a more refined sense of what’s going on in the market. Still, the overall growth and jobs is going to drive the overall demand for real estate. So just a question of, you know, are you looking for? Do you want to buy single family homes and rent them out to people? Or do you want to buy apartments or you know, what kind of stuff what kind of rentals Do you want to invest in? Look, you find the right kind of properties in almost any market, but it’s if you find properties, they’re sort of in sync with what the local economy is suggesting you do. You have a much better chance of really successful investment.
Jason Hartman 30:43
Okay, so are there some anomalies. For example, when you look at certain markets that are retirement oriented, say you look at Scottsdale, Arizona say you look at some areas in Florida now, I live in Florida now I used to live in Scottsdale, You know, retirees don’t take up a job, but they still have a house, hopefully. And they still go out to dinner and spend money on entertainment, and all that kind of stuff. But they don’t take a job slot. Yeah. And also, what do you do about the gig economy and the freelancers? And are they counted or counted properly? You know, nowadays, you’ve got so much mobility that, you know, there’s these digital nomads that don’t really live anywhere, but they, you know, they sleep somewhere. Yeah, they go into the Airbnb for a month and each place and, you know, move 12 times a year. I don’t know, there’s all kinds of things going on. Now. It’s complicated.
Ingo Winzer 31:40
Yeah, yeah. Yeah. Let’s start with the retirement markets. Because as you say, you know, retirees, by definition are less than say, by definition, you know, probably don’t have jobs. But what creates the demand for real estate in those areas is retirement markets. There’s a lot of lot of service jobs, all the people who are providing the services to the retirees. A lot of health Care jobs, lots of jobs in restaurants, all kinds of services. So, you know, in those markets, it’s not really retirees that you want to be renting to, you can be renting to the people who are providing the services to the retirees. And that obviously, the number of jobs through there is largely depends on how many retirees are moving into an area
Jason Hartman 32:19
to add to that to make it even more confusing snowbirds. You know, you’ve got these snowbirds. Yeah. To come into Arizona.
Ingo Winzer 32:28
Right. Yeah. And retirement. Retirement is also tricky. This is one of the most difficult things that during the last recession, because they’re markets where people say, Well, you know, I’m gonna retire in a few years, so maybe I should buy that condo right now. Prices are going maybe I’ll buy two of them. And so retirement markets actually end up being sort of during boom times and that being speculative markets where prices can change very, very rapidly. So in a way you think, well retirement markets as soon as steady markets, but today You know, because people are buying beforehand before they actually retiring, and then oh, then then they may have to sell because all of a sudden things aren’t working out so well. Prices can go up and down much more than than another market. We saw that especially in Florida, after 2008 that in some markets prices just fell 20% or so. Well,
Jason Hartman 33:18
I don’t know if you can blame the retirees on that. I mean, Florida was just a building madhouse. Oh, yeah. I mean, it was just there were speculators because for some reason, Florida attracts that mentality. There’s the old saying, I got some swampland in Florida. So you know, that I guess that started right around the Great Depression. Maybe you know, it’s just happening. Florida was absolutely psychotic place in the last boom before the Great Recession, so it didn’t surprise me at all that it had a bust. I agree. I agree. Yeah. Okay. What else can you share with our listeners? What else? Maybe a question. I haven’t asked you and go anything you want to share.
Ingo Winzer 33:58
Let me get back to the stuff I’ve We’re talking about, like getting really local and looking at the data that are available to help you with making an investment. I’ve recently I’m emphasizing a whole lot of this range of where the renters are. Because in many markets, people, you know, if you don’t know where the where the largest concentration of renters are, you can, you can fall in love with the property, which right now may have a tenant. And this tends to happen on the high side of the property ranges, where people say, see a beautiful property and has a tenant that’s that’s paying a lot. And so you invest and the tenants there, and then if the economy goes sour, for some reason, as we’re looking at that possibility right now, then the tenant moves out and they needed another tenant and you find it really difficult to get another tenant who’s willing to pay the same amount for that property, because that property is like an outlier, but it’s outside through the range where most renders are concentrated and nowhere. Most of those renders are, I think, you know, I’m not an investor or investor, I’m not an investor, knowing where that concentration of renders is, is extremely important in my mind, because you know, then you can decide you as well, okay, I’m going to I’m going to go through sort of lower vendors, or higher renders, but there within that range. And and also, if you’re looking at, if you’re looking at buying a property and upgrading it to a higher rental value, you want to make sure that you’re going to be upgrading it in maybe the top half of that, that what I call the favorite price range. So there’s a lot more data available now that people didn’t have before. Or let’s say, you know, data was available, we didn’t quite know what to do with it. So real estate investor is still an underserved group, because because it’s a gigantic industry, and the data about almost everything else in the world, but not good data from real estate still. Yeah, and by the way, I always like to say, ask myself the question, tell my listeners to ask the question. Compared to what? And I’ll tell you, in the United States, it is far better than it is around the world. And that’s one of the reasons I love the US real estate market comparatively. Because just the transparency of data and the availability of data in the US is dramatically better than it is elsewhere around the world. I mean, it is just really good here. I mean,
Jason Hartman 36:25
yeah, I know, it’s not as good as manufacturing widgets, or I don’t know, what would you compare it to where there’s really good data? Right. Yeah, it’s a you know, it’s a lumpy, imperfect market put it this way, it’s not as good as the stock market. That would be a great comparison. Right? Great data in the stock market. Admittedly, a lot of it’s cooked the books and it’s fake, obviously. Yeah. Well, you know, the data is very quantified. You know, you can search all the companies by their price to earnings ratio, the amount of buybacks they did what the insiders are doing, you know, as long as I mean, there’s fraud galore. It’s the modern version of organized crime, but But at least the data is there, right? take it for what it’s worth.
Ingo Winzer 37:05
It is Yeah, one of the reasons that individuals can make successful investments that that the real estate market is not dominated by a few corporations or its fragment ranking, you know, cranking stuff through computers and saying, Well, okay, we’re going to own all this stuff, because we know exactly what’s going to end with, you still don’t know exactly what’s going to happen. Right, you know, for any particular property, you don’t know what’s going to happen. So, you know, that’s why it’s still I shouldn’t say risky business that but that’s why it’s sort of an Ingo Winzer business. Right. Right. And that’s why individuals, you don’t have to be an analyst to do well at real estate investment. It’s good to hear from analysts, but you don’t need to be one. Right. Right.
Jason Hartman 37:42
I agree. Just to add to what you said, because that’s a good point. We always say to our investors, embrace the fragmentation. I mean, it’s, it’s frustrating, you know, that it’s not simple. You can’t click a mouse and trade your real estate, but all of these things that make it imperfect and love Be, that’s what keeps Goldman Sachs out of our business. Okay, you know, it’s what preserves the opportunity for the individual investor, and why the end of the visual investor can become very wealthy through income property, whereas, you know, it’s hard for the institutions to play in it. And they are this time around, it’s been very different post Great Recession, that we’ve seen a giant investors that own 50,000 homes, single family homes, you know, companies like invitation homes in this business that’s really never been done before to this scale. So they are playing in it and the data is getting better. There’s a lot more technology out there that will help you do it, but still compared to Can I deploy $30 billion of my fund in the stock market, you can do that much more easily in the public markets than you can in real estate. So yeah, yeah, absolutely Good, good stuff. give out your website and just wrap it up with Any closing thoughts?
Ingo Winzer 39:01
Sure. local market monitor.com local market monitor tlr.com and we’re trying to help investors to be successful with their real estate investments. That’s basically what it comes down to.
Jason Hartman 39:13
Excellent, Ingo, thanks for joining us and happy investing.
Ingo Winzer 39:16
Thank you very much.
Jason Hartman 39:19
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Ingo Winzer 39:29
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Jason Hartman 39:30
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