1404: Investors Benefits From Anti-Racist Appraisal Law?

Thanks for your support, Jason. I appreciate yours and Carrie's support and your whole network. It's really been very beneficial to me and a whole lot of others. I encourage everyone to use your resources that you have, but thank you.

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 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. And now, here's your host, Jason Hartman with the complete solution for real estate investors.

Welcome to episode 1404. 1404. And I've got the rabbi back with me today. I guess you're my favorite rabbi now. Evan Moffek, our client and guy who's on the show more and more because he's just interested in everything like I am. You're like a Renaissance rabbi.

Well, yeah. I mean, that's one of the reasons I love being a rabbi, is you kind of, you can be a generalist. You kind of have to know a lot about everything. Unfortunately, you don't have to know a lot about any particular thing. So I can kind of.

You don't have to have deep knowledge.

I can indulge my fancies.

Well, you know, they used to call that shallow, but I don't think you're shallow. You're a pretty intellectual guy and that's why I like having you on. Hey, so this proposal by Joe Biden is interesting. This is actually really quite interesting for real estate investors because I think, you know, what he wants to do is. Well, basically, I guess the context is. And then you can fill in the details. Okay, the context is that Joe Biden, like most lefty Democrats are, he's exploiting class envy. He's claiming that there's racial bias in a place that probably nobody's considered. There's racial bias appraisals. He says that home appraisals are racist. Okay, so is he right? That's one question. Or is he wrong? And the other thing is, what does it mean to you as a real estate investor? Now, I think there's a hidden benefit in this. So whether I Like a system or not, I'm going to try and align my interest with the powers that be with the system that's there so I can benefit. And that's what I want all of you listeners to do as well. Joe Biden, I think a lot of times he's just off, you know, out of his office rocker. Okay. And he had a recent thing about that, that he said something, another one of his crazy inappropriate remarks, right?

Yeah. He said, he said, I'm Joe Biden, I'm running for Senate.

He doesn't even know he's running for president. Okay, good. Well, I think this idea of his, though, has a hidden benefit for real estate investors, maybe a big one. So listen up, folks. You might like this. I don't know. You know, we'll. And regardless of whether, I mean, I don't think Biden has a chance at becoming president, but he did just have a good win in South Carolina. But these ideas get out into the ether, right. And they might have legs with another candidate. Okay. You know, or they might come back in two years or four years in the next election cycle. So Biden or not, the idea is out there in the marketplace now. So, Evan, let's talk more about the idea. Phyllis is an interesting thing.

So what Biden wants to do is to have a. What he's pointed out is that appraisals in certain neighborhoods, often African ones, where there is a primarily populated by African American households, that they tend to have lower appraisals for the similar types of property. And he wants to implement kind of a national appraisal standards and figure out ways to address implicit bias. Now, the very vagueness of the propos is what presents a problem for me. Like I base, you know, I'm not a big lefty, but I basically, I agree that there are some real problems on this issue.

I mean, look, folks, a Jewish guy who lives in Chicago would tend to lean to the left if I didn't know Yevin. So I'm just pointing that out.

Yeah. And I don't. I don't.

It's okay if you do. I still like you.

No, no, no. We've had some good conversations. The creep of socialism in the Democratic Party is just so distressing. But I agree that there is a problem. I have a, you know, I have several homes in Memphis and one of them got a low appraisal and the seller was convinced and he presented some pretty good case that the appraisal was terrible. The appraiser refused to change it. And he told me the Seller that this appraiser was well known for devaluing homes in predominantly African American neighborhoods. And we got another appraiser to come in and that person appraised it, I think $20,000 higher, which doesn't really mean anything unless you know the context, which is about 30% higher than the first appraiser. So I think this is a problem and I can imagine that this happens in other places. But how do you create a solution to it? I just don't see.

What do you do? All this kind of stuff ever leads to is a bunch of lawsuits. That's what it is. At the end of the day, any law is only, it only leads to a couple of things. It either leads to people showing up at your door with guns or people taking your money. And if you don't give them your money, in other words, a judgment in a court or fine by the government, people show up at your door with guns, inevitably that's what happens. Okay? That's what it devolves into. So this, I can just see massive litigation coming out of this because it's like a judgment call. I mean, look, the three primary rules of real estate since the beginning of time are what? Location, location and location. So how can you say that a three bedroom, two bath house in a bad neighborhood should be the same price as a three bedroom, two bath house in a nicer neighborhood?

This is what the article says. And this is based on a study from Brookings Institution which is.

Yeah, Brookings is a conservative think tank, right?

Well, they're center left.

They're left. Okay, I was wrong.

Majority African American neighborhoods do exhibit features associated with lower property values, including higher crime rates, longer commute times and less access to high scoring schools and well rated restaurants. The researchers wrote. Yet these factors only explain roughly half of the undervaluation of homes in such neighborhoods. As a result, owner occupied homes in majority African American neighborhoods are undervalued by $48,000 per home on average to the tune of 156 billion in lost value nationwide. This so called quote segregation tax contributes to the persistent racial wealth gap. Wow, those are big numbers.

But look, if an area's got higher crime, inferior schools, why wouldn't it be less expensive? I mean, to a degree.

To a degree. But how, how much those factors are contributing to the under appraisal is the question. Of course it'll have some less, it'll be less appraised. I mean a house in Beverly Hills is going to the same size will be much more than a house in Reseda. Right. I mean, it's. But should it be so much less, I think is the issue.

I don't know how you put a number on this. I mean, seriously, this kind of ambiguity is just, I can just see that lawsuits filling the courts that are so backed up already. I mean, how would you ever settle this? Now the funny thing is they say that the, you know, owner occupied homes in majority black neighborhoods are undervalued by $48,000 per home on average. And I'm quoting the article, that's exactly what I'm reading.

Right.

But it doesn't say what the price of that home is. I mean, it's, you know, you need to judge everything by a ratio. As I've taught our listeners for 15 years now, you got to always look at only the ratio, not the amount because it doesn't give you any reference point. So is that a hundred thousand dollar house? It's only $52,000 in the other neighborhood, or is it a, you know, $300,000 house, that's, you know, $252,000? I mean, I don't know what the reference point is.

Mm, yeah, interesting. Another lower on in the study, it says that the. One of the critics of this proposal said that the study itself was based on valuations from Zillow and not from human. Oh God. We know the problems with Zillow.

If you're going to depend on Zillow, you're already messed up.

Right.

Wow.

I mean, I think, you know, being in Chicago, Chicago has a kind of history of pretty bad racial bias in housing. And so I'm sensitive to this issue. It's kind of like certain with global warming. I believe there's global warming and there are serious environmental issues. The problem that I see is that people aren't focusing on the solution. People are always talking about the problem. There is a problem and I think there is a problem with under appraisals. But I don't think this is the right solution in some ways because of what you just said about lawsuits. Wish we could figure out some other way of kind of balancing this problem.

But I don't know the complexity of the legal theories that would be built in. Any litigation on this concept would be. It would be absolutely just beyond the beyond in terms of complexity because it's very hard to determine what the right answer is on this kind of thing. This is, I mean, the only way. Look at. Everybody needs to know there are three kinds of appraisals and I'm going to add a fourth. Okay, that's like my appendix. Okay. To the real. That's the real appraisal. Okay.

We're not gonna have to take it out.

No, not that appendix. Like the appendix in a book. Okay. You're an author. You know what I mean? Not. Not my appendix in my body. Right. Okay. Okay. So there is the comparison approach, right? And that's the way residential real estate is appraised. It's appraised based on comparison. So that's what this concept is addressing. There's the income approach, where the value of the property is determined on a commercial property by the income it produces. Then there's the cost approach, where the value of the property is determined based on the cost to rebuild it. Okay. And then there's the fourth appraisal, which is the most accurate appraisal of all. Selling the property to a buyer and having the deal actually close, that's the ultimate form of appraisal, is when a buyer buys the property. Okay. That there's no better appraisal than that because the market decided and someone actually voted with their money. Okay. But the complexity of litigation that would stem out of this would just be absolutely insane. I mean, it would be so complex, I can't even believe it, you know?

Yeah. Well, as you pointed out towards the beginning, there could be a benefit for this in that home values in areas where perhaps some of our listeners have invested could increase in values.

Big benefit. Yes. So why would they increase in values? Let's talk about that. So if this kind of thing went into effect and all the appraisers were. Were afraid of getting sued for discrimination, right. Then they would pump the values up in these neighborhoods, and that wouldn't only have an effect on values in these affected neighborhoods that we're talking about that this proposal is attended to address. It would have a knock on effect in all neighborhoods because then any common sense buyer who drives into the. For lack of a politically correct term that I'll probably have to use soon, the inferior neighborhood that is now valued, for a brief snapshot in time, at the same value, the better neighborhood with a higher test scores and lower crime rate is valued. They would not buy that home. They would buy the home in the nicer neighborhood. Okay? And when they do that, it's going to push more buyers to the nicer neighborhood and those values are going to go up. So this will. This is like raising the minimum wage. It's. It's pretty much exactly analogous to that.

If you are JASON HARTMAN LISTENER Then when the value goes up, right away you refi Till you die, you pull your money out. I mean, wouldn't you do that?

Absolutely. Absolutely. This will, this will cause home prices to go up pretty much across the board. And it will trickle up. Okay. We talk about, you know, you've heard all about trickle down economics. Well, this will cause trickle up economics the same way it works the same way as minimum wage. If you raise the minimum wage to $15 an hour, then every now every minimum wage employee gets more money. But then every non minimum wage employee thinks by reference, well, you know, I'm making $25 an hour. Why shouldn't I make $35 an hour now? Because the minimum wage people get 15 and I'm, you know, I went to college. They'll say, right, and I'm more qualified. I'm not a minimum wage person and I never have been. Right. That's what they'll say to themselves and then their boss. And it trickles right up. Everybody gets a raise. That's. And that's called inflation right there, right? Yeah. Wow. Fascinating stuff. If this goes into effect, if a thing like this ever happens, everybody listening is going to benefit. If you've been buying properties@jason hartman.com. okay. Shameless self promoter. All right, what's next, Evan?

Well, this actually, and you'll hope that'll be really good for you because you'll need the money as you live longer, because you'll be making more money and you'll be living longer. Yeah, and we've got a video right.

That, well, we got, we got a little audio clip here we want to play for you now. This is from the healthcare triage channel, which is pretty good. And this is about a study. And the speaker did not do the study. He's just referencing another study. But it shows that wealthier people actually do live longer. And Evan, it's nothing to sneeze at here. It's 15 years longer. 15 years. It's hugely significant. It's the difference between living to 65 and 80. Okay. It's a big deal. 15 years. And, and so, so let's just listen into this stuff and we're gonna, we'll, we'll, we'll stop it and have some comments for you.

Life expectancy in the United States, 2001 to 2014. Okay, get this. Researchers got a hold of 1.4 billion. Billion with a B. De identified tax records from 1999 to 2014. Then they got a hold of Social Security numbers for every single American with a Social Security number between 1999 and 2014. Then they linked them together and used Social Security death records to create life expectancy tables. So right off, it's hard to imagine that you could ever have more complete data. This is like nearly every adult American in the United States. From 1999 to 2014, they had data on 1,408,287,218 person year observations for people aged 40 to 76 years of age. The median household earnings among those who worked was just over $61,000. Over the study period, there were 4,114,380 deaths among men and 2,694,808 deaths among women.

The women always live longer and that's why they control all the wealth in the country, because they're. The men are dead.

Okay, jokes about that, but we probably shouldn't share them.

Okay, there are jokes about it. Yeah, I'm sure there are. I don't know the jokes you're referring to, but okay, we won't share. But this is a big study, folks. This is a lot of data. Like they've got a good sample size here. And this is one of the reasons you're listening to this show. This is one of the reasons you're building a big real estate portfolio so that you can have an expansive life, right? And not only in, in breadth, but also in length.

There were four main findings to this study. The first was that higher income was associated with the significantly longer life expectancy. The richest 1% of men live 87.3 years compared to 72.7 years for the poorest 1% of men. A 15 year difference for women.

Right there. 15 years. Amazing.

The richest 1% live 88.9 years compared to 78.8 for the poorest 1%, a difference of 10 years.

So the woman will live 10 years longer, the men will live 15 years longer. If you've got some money.

Thing to notice that this gap in life expectancy between the rich and the poor has been increasing over time. Between 2001 and 2014, life expectancy for the richest 5% of Americans increased 2.3 years for men and 2.9 years for women. But for those in the bottom 5% of income, it only increased 0.3 years for men and 0.04 years for women. The third finding was that life expectancy really differs among low income individuals depending on where you live. In the bottom 25% of earners in the United States, life expectancy differed by as many as 4.5 years depending on local areas. In some places, Life expectancy went up more than four years over the study period. In other places it went down more than two years.

I don't think he says the areas, but I'm guessing that the warmer climates have longer living people, right?

I would think so, yeah. You know what's so interesting? But I could just see, we were talking politics earlier. I could just see some people on the far left saying, isn't that horrible that rich people live longer? They literally are taking life away. But the truth is, life expectancy has gone up for everybody over the last hundred years by so much. It's kind of like trickle down. Yes, the rich are getting richer, but the quality of life for people in the lower 50% has gone up tremendously.

The poor are getting richer too. I mean, look, rising tide is floating all the ships now. It is though. There's a caveat to that, okay? It's floating. The rich ship a lot more, like exponentially more, okay? But it is floating all the ships, okay? There's no question about that. Because like I always say, watch old movies and TV shows and you can witness a depiction of poverty. In the old days, it was really poverty. It's not like what you think of today, okay, where poor people have iPhones and the newest Air Jordan shoes, okay? Poverty ain't what it used to be, at least in the US or really around the world, because we have this rising middle class and the rising 3 billion people.

This is the challenge of capitalism. Capitalism is extreme, extraordinary at producing wealth. And it just keeps producing wealth, keeps raising people's standard of living. However, the way it distributes that wealth is that it tends to distribute towards the top, at least the predominant. So the rich do get richer in capitalism, even as the poor also get richer, but the percentage flows to the rich.

Oh, definitely.

And it's an essential part of capitalism. How that works now, how, how then you redistribute to preserve the benefits of capitalism, but also address the shortcomings. That's where our debate should be, not about whether we should have capitalism at all. Which is where our debate seems to be right now.

One thing to note is that life expectancy is associated with a number of health behaviors in the lowest quartile of earners. Smoking, for instance, is a big deal. What's more surprising though, is what's not associated with life expectancy. Access to medical care, for instance, was not associated with difference in geographic life expectancy. How much Medicare spent or the proportion of people with health insurance were not associated with differences in life expectancy. Neither were Physical, environmental factors, income inequality or labor market conditions. What was associated with improved life expectancy in certain areas? Having more immigrants in the area, having more college graduates in the area, having more government expenditures in the area. Wealthier, more concentrated urban areas have higher life expectancies, even among the poor. In New York, where regulation of trans fats and smoking is common and social spending is high, there's a much higher life expectancy among the poor than, say, the rural West. This isn't to say that health insurance.

That really does surprise me. And I'm trying to figure out what the wrinkle might be in that, because I honestly kind of don't believe it, what he just said. It doesn't really seem to make sense. But, you know, it strikes me that in a city like New York, you're just not going to be as healthy as you are in a more rural area. But I don't know. You know, the problem is, you know, this isn't adjusted for probably accidental deaths, farming accidents, manufacturing accidents, it probably isn't adjusted for that. And so if you have someone that works in manufacturing or on a farm or in construction, or is a lumberjack who dies at the age of 26. Right. Because of an accident, that really skews the numbers like crazy. Even though there aren't many of those. But sadly, there are some of them. I don't know. That just sort of doesn't strike me as.

Although in big cities like New York, you've got people who walk a lot, so they're getting a lot of exercise.

That's true. But they're also breathing a lot of exhaust.

That's true, that's true. But you got access to healthier foods, you've got better healthcare systems. You know, maybe it balances.

Yeah, yeah, I know. It's kind of weird.

Yeah.

Aren't important. They surely are. But when we're talking about life expectancy and population health, it's important to realize that many other things, more at a public health level, may make a much bigger difference. Want to make everyone live longer. Pay attention to those things.

Very interesting. That's healthcare triage on YouTube. All right, well, do you think, Jason.

That there is a limit? You've done shows on survival and what was the biohacking show?

My longevity and biohacking show, yeah.

Is there an upper limit? Of course there is an upper limit on how long we can live. But what is that limit?

There seems to be so far, because it seems to be mostly about the telomeres and the cell replication problem and what happens Is as we age, our cells essentially become less functional and they become damaged by free radicals and so forth. And they need to duplicate. The cells, need to replicate themselves. And that's what keeps us young, right? That's why young people, you know, they, they look better, their cells turn over faster, they shed their skin faster, they grow hair faster, they're just more vibrant because the cells just work better. So the health of your body is really the health of your cells. So the problem is, as we age, the cells don't replicate as well or they go into extreme replication mode. And that equals cancer when they replicate too much. So there's this balance that needs to be achieved. And, you know, so far, knock on wood, they have not figured that out. But there's a lot of promising technology that shows we're on the verge of this stuff. And one of the interesting things, and maybe, you know, it would seem to tie in to income and overall wealth, and that's why you're listening to this show, to create wealth, is that when you simply keep yourself from dying, you actually can live pretty long. You know, a lot of people can live, you know, 80, 90, 100 years if they just will stop dying. And here's what I mean by that. It sounds sort of snarky, right? And it is a little, it's meant to be a little snarky, but just don't get cancer, don't get heart disease and don't have an accident. And if, if you, if you can avoid those, like those three things, you can actually live pretty long. Just stop dying, you know, stop dying an early death from those things. So eat good food, get some exercise, you know, cut down on the meat, have more vegetables. Every time you sit down at a meal and you look at your plate, just look at that plate for a second and think, is this plate at least 2/3 vegetables? Is it two thirds plants and only one third animal products? And you know, you're going to be pretty good if you do that.

It's good. I just visited with a member of my synagogue that's 98 years old, and she was just. We had the most wonderful conversation. Totally with it. Totally engaging. I mean, it's possible.

Yeah, it sure is. No question about it. And, oh, the other thing I meant to say, you know, besides the obvious is. And this is obvious, but not to some. Drink more water. Oh, yeah, my God, it's like the whole country is walking around in a dehydrated state. You gotta drink more water. That's the best biohack of all if you don't flush your system, all kinds of toxins are building up inside you. You've got. Got to drink more water.

Tons. Every morning I drink, you know, a liter of water.

Yeah, you gotta. You gotta drink more water. Water is water right after oxygen. Water is life. Okay. All right, let's wrap it up. Evan. I think we're good for today, folks. If you want to learn more about creating wealth, go to Jason hartman.com or call us at 1-800-hartman and until tomorrow, happy investing.

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