1898: Rates Up, Rents Up! Worse for Homebuyers or Renters? Empowered Investor LIVE in January!

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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 1898. 1898. And thanks for joining us today. I have the big announcement you've all been asking for, you've all been waiting for. You've been bugging me about this. You've been bugging our investment counselors, our team, our staff. They've been hearing a lot about this from you for a long, long time. And we finally have that thing to announce right now. For those watching on video, I'm going to share my screen and show you, but for those on audio only, I'll tell you yes. Our next live event is coming up and it is in beautiful Scottsdale, Arizona. Scottsdale, Arizona. So excited. One of my favorite places. Save the date January 27th. This will be a three day event. Friday, Saturday, Sunday or really two and a half day if you will. Not with all our evening fun we're going to have. It's going to be a three day event, I guess if you look at it that way. But we'll start Friday at approximately 1:30 and we'll go all day and all night Saturday and then all day Sunday and Friday. We'll have an evening event as well. So it's going to be a fantastic empowered investor live conference in Scottsdale, Arizona. January 27th, 28th and 29th. Friday, Saturday, Sunday. Save the date. It is in ink. We're doing it. I know it's been a little while since we've had a live conference. I love doing them. The hotels have been a nightmare in the post Covid world to get any even remotely reasonable pricing which we still did not achieve. And but we, you know, we're really trying to keep your ticket prices reasonable. We didn't want to pass this all along to you and expect you to, you know, an ungodly fortune for event tickets. So anyway, this is coming up. Save the date for that. But we have another event coming up. And you know what I'm going to say that is our virtual event and that is recession proof Investing Summit virtual event and that is coming up at the beginning of October. And guess what? If you sign up for that and you join us for this event, we might offer a really nice discount for the live Scottsdale event.

So that's another reason to come to this one. Join us Virtually super easy Friday evening, Saturday. About five hours will run on Saturday and just a really easy event. You can also get the recordings when you get your tickets. Go to Jason Hartman.com for that. No tickets available yet for the Scottsdale event, but as soon as we have that up and running, we'll announce it for you so you can get your tickets for that. And remember, one of the great things we do, besides providing great speakers, besides providing great content at our live events, we also have a lot of fun. So we're planning a great cocktail party on Friday evening and then Saturday evening we're going to have a band. You know, I love to rock out and I know a lot of you do too because I see you tearing up the dance floor. And so we'll have a fun band for Saturday evening as well. It's at a gorgeous resort in Scottsdale, Arizona. Really beautiful property. And it's going to be a great time. So join us for our virtual event. Go get your tickets for that@jason hartman.com and then join us for our live event. Okay, let's get into it. So I posted this yesterday if you follow me on all the social media places. Rates up, rents up, rates up, rents up. And here I'm looking at a chart from the inflation tracker account and it says mortgage rates versus rental prices. When rates go up, rents go up. Well, you know, this is elementary, my dear Watson, as the saying goes. But when you see it in visual form in a chart, it really is quite interesting. You know, looking back quite a ways, how far does this go back to 2007 on up to present day, you can see that there was a divergence between 30 year mortgage rates and rents for a little while during the Great Recession. And you know, we did not catch that too badly. But again, these kinds of things, they cover all price ranges in all markets and we're not in all markets and we're certainly not in all price ranges. We're at the lower end of the price Spectrum and, you know, below the middle, but lower to lower middle, I guess, is a fair way to say it. You know, when you're looking at purchasing a property, if it's a single family home in any given market, below the median price in that market, that's a fairly good way to look at things. Okay, so that's one of the problems with a lot of these stats. You know, they don't segment well at all. Hardly any of them ever do. It's extremely rare. Remember, you had, and I've said this many times, during the 2008 election, you had all of this, you know, from McCain or Obama, it didn't matter. We got rhino, McCain, we got socialist, fascist, Obama. Either side of the spectrum, you know, they're both, they both suck. The whole narrative was keep people in their houses. Keep them in their houses. Well, why.

Why should you keep people in their houses? That's a silly idea. You should get people to move to the right house, right? The house they can actually afford. That's a sustainable economic plan. But of course, the government distorts markets and it's, it's a mess. And so that's why you see this rather large divergence. And by the way, it's the only time you really had that divergence in rents versus prices. But I also want you to notice something that I've said throughout our time together over the last 18 years on the show here, and that is, of course, that the rents always lag the prices by a very significant time frame. You're going to have to think of this as at least two years, maybe even three years. So as I've said many, many times, we've still got a lot of upward pressure on rents in the system, and you're going to see that play out and it's going to be extremely, extremely significant as time goes on. So whatever you think rents are now, if you think they're too high, they're going to get a lot higher in the future. So you can take that one to the bank. Actually, we need sound effects. Yeah, you can take it to the bank. Okay, this one was the post that I talked about on Monday, but I have it here for you. Vis. And so I can quote it exactly. It's on my Twitter account. It's on my Instagram account. Twitter, Jason Hartman. ROI Instagram, Jason Hartman. And the number one myopic people are focused on housing prices when they should focus on yield or return, on investment. That's what investing is all about, obviously, right. So really keep that in mind. Right. That's what a real investor focuses on. They don't try to speculate, they don't worry, oh my God, are prices going up or prices going down? I gotta time the market. Maybe I should keep my powder dry and, you know, store my cash as it's being eaten alive by inflation. And I'll just wait, you know, I'll wait to time the market. And then they're wrong, wrong, wrong over again because nobody is good at timing the market. You just see it over and over again. People been saying that for at least the last eight years now. I mean, I've heard that so many times coming out of the Great Recession, as prices started to rise, rent started to rise. Everybody said, oh my gosh, this is unsustainable. It can't keep going. Well, GUESS what, it's 2022. And it kept going eight years longer than they kept saying. There will always be corrections. But if you invest for yield, if you have a decent yield on those properties, you don't have to stress about that stuff, okay? That's what investing is. You invest for yield. And you, at the very least, which I don't think is the greatest thing ever, but at the very least, you're going to dollar cost average into the market. And that act of investing is also a forced savings program. So it has a good psychological component where you're not going to blow the money, you're not going to spend the money on some silly depreciating asset. You're going to buy assets that produce income for you. And that's what investing is all about. Okay, let's get to the next one. Now this is interesting. Home buyers are feeling the pinch of rising cost more than renters. Well, the first thing to ask is, is that bad or is it good? We'll see. The median monthly mortgage payment was almost one and a half times as much as the median monthly asking rent in the second quarter. The large, largest differential in records going back to 2009, according to data tracked by the Mortgage Bankers association and industry trade group, also known as the mba. And they're the ones, by the way, you can tell when I'm not reading and I'm just talking to you, Right? Okay. They're the ones, by the way, that publish that very important index that is the mcai, the Mortgage Credit Availability Index, because remember, it's not just about interest rates. And we saw this very significantly 12 years ago, 10 years ago, coming out of the Great Recession, because it's not just about mortgage rates, it's about the availability of capital to borrow in the first place? How hard is it to borrow? How difficult are those lenders being when they are saying they will give you financing? They say they'll give you a mortgage, but in reality they're not really going to give you a mortgage and they're going to make you jump through some so many hoops that it's just almost impossible to get a mortgage. Okay, Home prices and rents have risen briskly over the past year and a half. Well, more than that, but. Okay, I'm just reading the article. But the rising relative cost of buying is largely the result of additional interest buyers are paying when they lock in mortgages at the highest rates in years. Remember, three dimensions of real estate here, folks, are high rates, good or bad. Most people are gonna say they're bad, right? And they are lower than the rate of inflation by a huge margin as we've talked about many, many times. But remember, they create a barrier to entry for would be homeowners and that forces those people to stay in the rental pool. And guess who rents property to them? You and me and everybody else listening. Right? That's what it's all about. That's the game. So high interest rates are actually quite beneficial because they put that huge barrier to entry there for the tenants and they keep them in the rental pool, thus pushing massive upward pressure on rents. Okay, the average 30 year fixed rate mortgage rate rose to 5.66% this week, nearly double what it was a year earlier. Wow, that is quite significant. Of course, we've talked about that a zillion and one times according to a Freddie Mac survey. The shift is a shock for many buyers because low interest rates in the past few years had ushered in a period of greater affordability and it brought many first time buyers into the market. Well, the opposite is happening now, as this post on Reddit I found for you, it says were officially out. It's under the rent category on Reddit. Right. We just can't afford it. The rate increase was too much and the cost of houses in our state will not decrease as we are in a state where people are flocking to. Well, that might be Florida, I'm guessing. Oh, by the way, by the way folks, I got to just go on a tangent alert here. Okay, a little tangent. Before I finish this Reddit post, I want to say a big warm welcome to all our listeners in Martha's Vineyard.

You know what I'm getting at? Oh, and our brilliant governor in Florida. I mean, can you believe these lefty hypocrite Scumbags. You know, they want everybody else to live with the massive onslaught of illegal immigration yet in their elitist community of Martha's Vineyard, which, by the way, we took the Venture alliance mastermind there years ago. And it's a beautiful place. I love Martha's Vineyard. Great place, but I guess just shipping 50 illegal immigrants. Oh, I'm sorry, Hillary. I'm sorry I didn't get it right. She says workers without papers. Apologies, folks, I'm not being politically correct here. You know, it causes a huge upset. And then Ron Desantis was outdone by the Texas governor who shipped a whole bunch of workers without papers to the home of Kamala Harris, the biggest stupid hypocrite of them all.

Oh, you gotta love that. Yeah, Kamala's got the Secret Service out there getting these, these workers without papers out of her, out of her neighborhood. You know, God forbid the elites, you know, the rules apply. Well, you know, what did George Orwell say in the book Animal Farm? Some animals are more equal than others. Yeah, that's what Kamala and all the snobs on Martha's Vineyard would say. But yeah, I want to welcome our 50 new listeners in Martha's Vineyard and the other new listeners over by Vice President Kamala Harris's house. That's, it's pretty great to have you listening to the show. So welcome. So back to the Reddit post where they're just frustrated about the rents. They're officially out. They give up. They can't afford to buy a house and I don't know what these people are going to do. Right. It goes on to say we could afford it at 3% but not at 6%, referring to the mortgage rate of course, which adds 400 plus more money per month. I guess they should have included a dollar sign there, but $400 plus more per month to the mortgage. And you this person is in a very low priced shopping environment where they're looking. So folks, this is why everybody's moving to Florida and Texas, because their government makes sense in those places and they're doing the right thing. But yeah, I get it. On the housing affordability as this renter and would be first time buyer on Reddit is complaining. And folks, this is what a mismanaged country looks like. This is what inflation looks like. This is what bad fiscal policy. Spend, spend, spend, bad monetary policy. Print, print, print. You know, this is what it does. It impoverishes the people who they say they're trying to help. Yet us folks listening to this show, we benefit from it. And it's just a cantillon transfer of wealth. The people closest to the money printer are the ones who benefit the most. And that's exactly what is happening. So I'm benefiting, you're benefiting. But you know, I can see beyond my own self interest. This is not fair. This is disgusting what they are doing. Now look, the elites are getting a lot richer than I am and probably a lot richer than you are too. But you know, we're getting pretty rich through this bad fiscal and monetary policy. For sure, inflation benefits us in a huge way. We love inflation induced debt destruction. Trademark Hartman Media or, well, which company owns that? I don't know. Anyway, I trademarked it. But that strategy works really, really well. So very important thing. Okay, there we go. The frustration. Okay, so let's look at this. All of the Crash Bros. And what they're saying about the upcoming housing crash. Well, what does this chart tell us? Single family, serious delinquency rates, 90 days plus or in foreclosure. So these are the people that are way behind on their mortgage payments. And you see what happened leading up to the Great Recession. A lot more people became serious delinquent. Seriously delinquent. Because of course, that janitor at the local elementary school who was making 50 grand a year, guess what? He should not be buying. Oh wait, there I go again, being politically incorrect. She should not be buying. How many female janitors do you see? You know, as long as I've seen people picking up the trash, like in my neighborhood, right? The trash truck comes, never. Are there trash collectors who are female? Why is that? Why is that? And then everybody's complaining about a pay gap. But guess what? These poor guys are doing the lonely, dangerous, smelly, crappy jobs now. Women do some crappy jobs too, I guess you could say. You know, a lot of their jobs are crappy too. But mostly they're sitting in a nice office, having coffee, a slave to a spreadsheet, probably because, hey, that's what the world has produced nowadays. They first enslaved men to corporations, but then they thought, we got to enslave the other half of the population. Let's enslave the women too and make them while away their life in a cubicle, looking at a computer screen and answering to some boss who couldn't care less about them. Right? Yeah, that's progress. Okay, unbelievable. Anyway, back to the chart here. So, yeah, the janitor making 50 grand a year regardless of their gender, couldn't afford a $900,000 house. Imagine that. That's the ninja loans and all the stuff that led up to the Great Recession. But after that, you can see that these numbers from Freddie Mac, Fannie Mae, they're pretty much in sync in terms of their delinquency rates. And right now they are historically low. If you want to have a housing crash, you've got to have a distressed homeowner. That's elementary, my dear Watson. No distressed homeowners, no housing crash. Just not going to happen. Now. They may start to become distressed. I don't deny that. But right now, they're not distressed yet. We're going to look at some more on this here in a moment. Okay, let's look at the next chart. Now, we talked about this on Monday as we shared some stats about a huge lack of new listings coming on the market. And I'm going to show you a chart here, and if you're only listening on audio, I'm going to explain it to you because it is pretty amazing. And you have not seen this one before. It's coming up in a moment. But this one I did show you on Monday. And this just shows you how there are dramatically fewer new listings coming to the market and still a good chunk of transactions that are considered immediate sales. Boom goes on the market. Boom. Immediate sale, you know, selling almost immediately, many times. Still, even in this market with higher interest rates, with multiple offers, okay, 25% fewer new listings each week than we'd expect for this time of year. The portion selling immediately is finally slowing, but it's still pretty high. And if you look at these numbers, if you're looking at the chart, if you see the visual, you can see how pronounced both of these things are. Why is that? Well, it's because of what I predicted back in February, right when we first started to use the word coronavirus a lot. Oh, I can't say that. I guess. Not allowed. Not allowed to say those words. Cerveza sickness. Okay. Okay. Here's one chart I haven't gotten to, the golden chart I want to show you here yet. Okay. But here's another one that's pretty darn interesting. Okay. Household real estate value and household mortgage debt. How indebted are these homeowners as a percentage of GDP or gross domestic product right now? Why would that be important? Because when we want to look at the size of the housing value and the size of the housing debt against that value, the liability against it, which, hey, you know what I say the mortgage isn't really a liability necessarily. We're going to compare it to something and that's the overall size of the economy. Because if we go back, like this chart does, way back to 1952, when that other half of the population wasn't enslaved, sitting in a cubicle doing a spreadsheet all day, you know, because God forbid, being a mom would be just. You'd have to be considered a loser to have kids and be a mom. And, you know, that old, silly, traditional idea. Right? Better to be a slave to a corporation. You know, freeze your eggs. Wait, you know, put it off, don't do it. Right. You know, because these corporations need you working in your cubicle, and they also need you paying taxes. The government needs that tax revenue, and the overall economy needs your contribution to the GDP. You know, being a mom doesn't contribute to the GDP. At least not for about 22 years. Right? 18 to 22 years, I guess. Right. Well. Or if it's the millennial generation and it takes about 40 years, we will sell no wine before its time, as Ernest and Julio Gallo used to say. Right. Yeah, the millennials, they go a little. Little. They wait a little longer to, you know, contribute to the gdp. Not all of them, certainly. You know, it's funny, the millennial generation, you know, it's really so unfair to stereotype them, because half of them are so good. They're such complete winners. I mean, they're just going somewhere in life. They're into everything they read, all the books they go to, all the conferences, they're into, you know, they're into money investing, biohacking, physical fitness, like, everything, Right? You know, there's some really good millennials out there. But then there's this other half, the one that sort of gets all the attention, actually, you know. Oh, boy. They gotta stop watching tv, playing video games, and eating potato chips and hot dogs all day. Right? Okay, so mortgage Debt is up $1.46 trillion from the peak during the housing bubble, the Great recession. As a percent of GDP, it's 48.9%, up slightly from the first quarter and down from a peak of 73.3% of GDP during the housing bust.

Did you hear that? We got to listen to that again. Okay, let's listen to that again.

As a percentage of GDP, the mortgage debt is about 49% right now. Before the housing bust, the Great Recession, it was over 73%.

What does that mean? It means that most homeowners have large equity cushions in their home, and some.

Say it's just not a concern. Mortgage equity. Right. Is just not a concern. This mortgage equity wealth Is very, very significant. But it's even better than this and I'll tell you why. Because remember, 25% of these mortgages that are so low compared to the value of the home are below 3%. Interest.

Below 3%. And how many are below 4% and how many are below 4.5% and 5%? A whole lot more. I don't know the number, but a whole lot more. And they now have a huge asset because you cannot duplicate that mortgage again. And these people are not distressed and they are not going to part with those mortgages. I'm going to show you this huge chart in just a moment here. Get ready, get ready. It's going to blow your mind. I've not shared this one before. And let's not forget that 40% are free and clear. They have no mortgage at all. Show me the distressed homeowner. Still can't find them. Rising mortgage rates complicate the decision on buying versus renting. I think this one's from the Wall Street Journal and the source for their data is the mba, the Mortgage Bankers Association. So this shows the ratio of mortgage payment to asking rent. And we can see that the mortgage payment to asking rent ratio is much higher. Meaning that there's little distinction now between should you buy or should you rent? Whereas before that was definitely an alarm bell saying buy, buy, buy. It's such a good deal to buy. And that's, hey, that's what everybody did, right? It's what they did. But now that incentive to buy has diminished significantly. So people are just staying in the rental market. So very, very significant. Okay, here it is. Okay, this is the chart you gotta hear. I'm not gonna say, see, because I'm gonna explain it to you. Going back to 1995 on up to present day, there are two things to look at here. Existing single family homes and how many months of supply there are in terms of what is the inventory versus the sales rate, how many months of supply versus new single family homes. Lot to unpack here. This is a big deal. Big deal chart, big deal.

Existing homeowners don't want to sell because they have such attractive mortgages that they don't want to relinquish. If they sell the home, they got to give up the great mortgage. And that's the poison pill that the Federal Reserve has put into the market that is going to last for three decades. It's a 30 year poison pill. You know, have you ever taken a pill for something? Maybe you were in pain and you took a painkiller. Maybe you couldn't sleep and you took an Ambien. Maybe you took a supplement to give you some energy to work out. Right? You take this pill and its effect wears off pretty quickly, right? Because all your body has to do is metabolize it. And usually that's going to happen in a few hours. It'll probably start to take effect in like 20 minutes once it gets into your bloodstream and then it'll metabolize in a few hours. Right. And the effect will be gone. But this pill that the Federal Reserve has created of these artificially insanely low negative interest rates is going to be a 30 year metabolization.

30 year mortgages. Now granted, some of those mortgages only have 28 or 29 years left on them, but nobody's going to want to give those up unless mortgage rates get lower in the future than what they were at the low point. 4. Right. Or just, let's just go with under 3%. How many of you think that's going to happen? Not extremely likely. Okay, so we've got 3.3 months supply of existing homes and there's a lot of new homes coming on the market. And they're projecting that this number is going to go to about 10 months of supply. That would be considered a bit of an inventory glut because remember, six months is your benchmark for somewhat normal. But wait, there's more. Here's the thing you gotta understand. Nobody's building entry level homes. We've talked about that for a long time now. They're just not profitable. Nobody's building cheap entry level houses. So this glut of new homes right now, and of course this is a moving target too, as prices change and increase. These are $600,000 homes, $700,000 homes, $800,000 homes, homes that are over a million dollars brand new. Right? And remember, with those new homes, you have to buy a lot of extras. A lot of times you have to landscape them. Window coverings, of course, all the upgrades. They're a lot more expensive than they look on the surface. And that's not true of resale homes. Now a resale home you might fix up, but a new home you got to do a lot of. There's a lot of hidden cost in a new home. Okay? So very, very significant here. There's a massive shortage in the resale housing market. And there is projected to be a bit of a glut in the new home market, but not in the entry level new homes. No glut there for people thinking that they are wrong.

Not happening. And it's not coming online in any significant way. You're going to hear on the news that the new home market is oversupplied, that it's saturated, that new home sales, I mean, look at, look at all the stats on builder confidence, they're low. I've been reading the data, reading the articles, looking at the charts, and builder confidence is not high right now. Remember, those builders are mostly building homes that are well over $500,000, certainly not entry level housing, mostly well over $600,000 and depending on the market, sometimes way, way over a million dollars. So not our market, folks, not our rental housing market. Not a significant issue for this. All right. And by the way, if you're listening only on the podcast, go to my social Media, go to YouTube especially and you'll see all of these charts there for you. Remember, save the date January 27th, 28th and 29th. Scottsdale, Arizona. We're going to have a fantastic conference. We're going to have a lot of fun. We're going to learn a lot. We're going to have some great speakers. And that is coming up January of next year and you'll start the new year off right. Beautiful Scottsdale, Arizona. If you're in one of the winter climates, you'll love coming to Scottsdale in January. It's just such a beautiful place. That's it for now, but join us for our recession proof investing event. And you can get a discount on our upcoming live event if you join us for that one because we're going to offer a little deal for everybody who joined us for the virtual event. So you can do that, Jason hartman.com and we will see you next time.

Hey buddy. Just wanted to say thanks again for the awesome job you did Friday morning. That was great. Just started out our day perfectly and put a cap on our event. I just thought it was awesome, man. You did a great job. But even more than that, just appreciate your spirit in the room, man. Seem like you're just more alive and just more enthusiastic than ever about things you're working on and things the family's doing. So I just want you to know I appreciate you, man. Travel safe.

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