2018: Understanding the Rising Median Age in the US, It's Demographic Trends and Impact on the Economy

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Hey Jason, just wanted to send you a quick message of gratitude. So grateful that I got into the game and got in with properties that make sense because the rent income keeps coming in. So thank you. Glad we connected and I'm glad to be in the income property game instead of the Wall street game for my future.

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.

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 2018 and greetings from Barcelona, Spain, where it is warm and I have enjoyed this city more than I have on prior trips. This time been here, maybe this is my fourth visit to Barcelona. You know, I didn't really appreciate it enough because I didn't do the tourist thing as I've been doing on this trip. So seeing a few more sites and feeling a little bit more of a tourist this time. And I have to say I haven't loved the city in the past, but I like it more this time because I'm doing more touristy things, seeing more sites, more museums, and really appreciating why so many people love to visit Barcelona, which I have to admit, I haven't done in the past. And it just goes to show you that you got to give things a try multiple times from multiple angles, sometimes two, to really appreciate them. But you know, on all of my visits to Europe, and there have been many of them, I have been struck and kind of saddened at the birth rate decline in Europe. Of course, we have this problem in the United States and around the world in many countries. You know, I'm a big student of demographics and how that affects the economy and the real estate market. And what always strikes me when I come to Europe is really how old Europe is. And I don't mean the buildings, I mean the people, because they simply are not replacing themselves. They're just not having children. And we've talked about this many times on many prior episodes and it is certainly true here. So this article is about the United States. US Population reaches record high median age. The population is now older than it has ever been according to the U.S. census Bureau data. And just to give this some comparison, since I am in Spain now, what country do you think has a higher median age? Is it the United States or is it Spain? And really, Spain can be lumped in mostly with Western Europe because they all kind of have that same demographic problem not replacing themselves. And of course, this will have profound impacts on the economy, the real estate market for decades to come. Well, what is this high median age in the US that is now a record, the record high in median age since it's been recorded. And that is 38.9 years. The median age of the United States, 38.9 years old. And compare that, because I have it right here to Spain. And as of 2020, the median age of Spain was 44.9 years. So Spain is older than the United States. Again, they are doing a worse job of replacing themselves. Remember, replacement rate is 2.1 children per woman. 2.1. That's the magic number. If you want to simply maintain a stable population, not increase the population, not decrease the population, you got to have 2.1 kids. Okay, so what is that number in the United States? It's 1.78. The United States is getting smaller. It is a shrinking population. Of course you can fix, if you will, and I'm using fix in quotes, this problem through immigration. But even then, that comes with a whole host of other issues, as we all know. But Spain compared to the US Spain is only 1.39 per woman. US being 1.78. Japan, I was there a few months ago. We talked about that a lot. That's 1.36. Actually doing a better job than it has in the past of replacing themselves. But their neighbor, South Korea, not too far away from Japan, is the lowest birth rate in the world at 0.8 0.7 8.78 children per woman.

Wow.

Absolute population collapse in South Korea. Can you imagine being a real estate investor in a place like Japan or South Korea and just how completely different that is. There is a program in Japan which I talked about in the past, about how they're literally giving away homes. You can just have a house there. Maybe it's a good idea to consider if you're just really discouraged with housing affordability problem in the United States, which I say is going to get worse before it gets better again. These population problems really won't hit the US as an issue until the late 2000-40s. And, you know, between now and then, a lot can happen. We'll see what happens with immigration and so forth. Maybe birth rates will pick up. Maybe the pendulum will swing back to 2.1 kids per woman or more like they did in the past. Because remember, children used to be your pension. That was your retirement plan to have children, right? And that has been replaced by government and corporations and the corporatocracy replacing children as the pension, if you will. Now we see that that is collapsing because governments can't afford to pay the pensions. Corporations have abandoned their pension plans largely around the world. It is just a whole different scenario. But what's interesting here in this study of the US Population, let's go back to that. The rise is precipitous. That's meaning the median age, okay? Having previously reached 30 years old in 1980 and 35 in the year 2000, it's now 38.9 years old is the median age. And, you know, it's really interesting to think about the baby boomers and how so many of them were going through the same life stages at the same time. We had 76 million baby boomers, and they all kind of came of age during that same era and marked profound changes in the world. Right? We fought the Vietnam War, we had Woodstock, we had the sexual revolution. We had all of these things that were so typical of that, like, 60s and 70s era. And what's interesting about it is we didn't have the media fragmentation that we have today. Think about it. All those baby boomers grew up watching the same three television networks. That's where they got their news. That's where they got their TV programming, That's where they got their entertainment. They basically pretty much listened to the same music. And all of these things were so much, much less fragmented. But nowadays, everybody's into their own thing. Everybody's got like, you know, a whole different genre of music they listen to. They've got different media they listen to. They're getting their news in different places. And all of that is constantly reinforced by algorithms. So we all live in this kind of echo chamber of where we're getting our information. And because once the algorithm learns what we like, it keeps feeding us more and more of that same thing, those same things that reinforce our existing likes, our existing dislikes, and our existing opinions. So it's just a completely different world nowadays, it really is so, so different and demographics are really changing. Now, one thing I did want to say about this is that I talked about Spain a moment ago. So do the fast forward on this. And of course, you could do the same thing in the United States, but much less of a problem. But since I am in Spain, it's just interesting to point out by 2050, that median age in Spain will reach 53.2 years old, 53.2 years old, currently 44. So in the United States, and I don't have it in front of me, but you might project that to say people that are 38.9 years old. Now, in terms of that median age in the US by 2050, that median age will be in the late 40s or hovering right around 50 years old. And when you look around the country, if you look at Maine, that's got the oldest median age of 44.8 years, New Hampshire, 43.3 years. But the youngest state in the country is actually Utah and at 31.9 years, followed by Washington, D.C. at 34.8 years and Texas at 35.5 years. So, wow. Among the counties with populations over 100,000, the oldest was Sumter County, Florida. Okay, so we talked about states, but now we're talking about counties. And that's where the famous retirement community, the Villages, is. That's a giant retirement community where the Median age is 68.1 years.

The largest county was Utah county, the home of the city Provo, with a median age of only 25.7 years. So these big counties within these states obviously skew and influence the state's median age. Really interesting to look at that. But the US Is growing older and faster and it's going to continue to do so. Now we've got a virtual event coming up. A lot of you have been asking us, Jason, when are you going to have your next virtual or live event? Well, our next event's going to be virtual, and it is creating wealth. That is the most popular, longest running event that I have done. I've been doing this event for about 19 years, and I'm going to do it again virtually. We have never done creating wealth virtually, I don't think. No, you know, we haven't. So we're going to do creating wealth virtually, and that's going to be July 21st and July 22nd. Basically, the format of these is Friday evening will go for about two hours from 7 to 9 Eastern, and then Saturday will go from 11 to 4 Eastern time. And that's July 21st and 22nd. So for more info on that, go to Jason Hartman.com and we will be glad to have you at that virtual event. Real easy. Just jump on Zoom and join us for that. You know, these virtual events are not giant events. You really do have a chance to get questions answered. We might do breakout rooms or meetings with our investment counselors during the event. And we'll really go over some of those really key important macroeconomic issues that influence all, all of us, all of our investments, all of our thinking, and look forward to seeing you there July 21st and 22nd for creating wealth virtual event. Now, inventory, of course, we've talked about inventory a lot, but I want to talk about housing inventory in a different way. And this comes from First American. And I have talked a lot about how I like their index as my second favorite index. Their housing. They have their own version of a, you know, housing price index or housing affordability type index. It really is my second favorite index. But one of the things that they recently published is talking about inventory. And it says one way to measure existing home inventory is to track inventory turnover. Okay, so this is inventory turnover, a specific component of it, the supply of existing homes for sale as a percentage of the total occupied residential inventory. All right. Prior to the start of the pandemic In February of 2020, existing home inventory averaged 2.2%. In other words, 220 out of every 10,000 homes were for sale. Inventory turnover hit a historic low of zero point.

In February of 2020. That's when everybody was taking their house off the market. They didn't know what was going on. Everybody was freaking out over this, largely. Well, I'm not going to go into it under fear of being canceled, but we all know what happened because we were all there, right? Okay. So it has made little progress since then. As of the most recent data, In April of 2023, approximately 84 homes in every 10,000 were for sale, well below the historic average. So in other words, 220 out of every 10,000 homes were for sale. Right? That's February of 2020, a historic low of 0.77. And currently, as of April, 84 homes out of every 10,000 were for sale, well below the historic average. If you're watching this on video, you can see a handy dandy chart that just shows you the massive lack of inventory we have in the housing market. Again, another way to look at it, because this is occupied residential homes and looking at the turnover percentage of them, just simply not enough resale inventory And a problem that will very likely remain unsolved for many, many years to come. Again, how does that problem get solved? One, we have a massive decline in interest rates causing people to place less value on that low interest rate mortgage they have currently. And so that would entice people to put their homes on the market because they wouldn't be thinking, well, I can't match the rate I have now. The rate I have now isn't so special because now I can go borrow money at a rate that is close to or at the current rate. I have 25% of the people with a rate at or below 3%, 65% of the people with a rate at or below 4%. Right. So they would all start to think that, hey, the thing I've got isn't that rare anymore. That kind of mortgage is now again available in the market. So now it frees up their thinking and their capital in terms of moving. Right. Unlikely to happen. At least that's what I think. I don't think we're going to see rates that low again anytime soon. So that's unlikely. The other thing they could do is they could repeal the due on sale clause and that would allow people to let those mortgages be assumed. Or maybe, maybe some totally new thing happens like mortgage lenders allow people to move their mortgage with the house. Never been done before. It's a weird idea. I doubt it could work. There are a million obstacles to that in terms of changing the collateral substitute. You know, that's a basically a substitution of collateral for the lender. But again, it would free up inventory. However, if any of these things happen, let's think about the knock on effect to that. Right? So people would initially sell their homes, but they would also buy another home because they'd be very enticed to buy because they could also get a low rate mortgage on that replacement property. And so it would initially cause inventory to come onto the market, but it would also gobble up the next stage inventory of those sellers buying something. So again, doesn't really solve the problem. Okay. What really solves the problem is this one, creating more inventory, creating more housing. And that means more atoms, right? More materials need to be created, they need to be built, they need to be supplied. And so that's the way to solve the inventory problem. Overall, all of these other things are stopgap measures. The only real way to solve the inventory problem is to simply create more housing.

That's it.

Okay. All right. So what we promised to do today is do a little bit of review of some of our core content. So let's go ahead and dive into that for a few minutes before we wrap it up today.

Today I'd like to talk about a commonly misunderstood or not understood at all subject when it relates to investing, especially real estate investing. See, most investments are one dimensional in nature. Conceptually, they're all about buy low, sell high. You buy a stock, you buy it low, you want to sell it high. Now maybe it's a dividend paying stock. So you buy low, you get some tiny little dividends and pay taxes on them all along and then sell it and pay capital gains tax. Again, I'm kind of alluding to here the fact that real estate is such a tax favored asset. You really never have to pay tax on your real estate. If you do it right, it's very tax efficient. But if you buy precious metals, you want to buy low, sell high if you buy bonds, same idea, right? Real estate though, is so misunderstood because real estate has a multidimensional nature. Now what do I mean by a multi dimensional nature? Well, real estate has many dimensions, but in this podcast we're just going to talk really about three of them and we'll call this, as we've called it for many years now, the three Dimensions of Real Estate Investing. Think about how real estate has a multi dimensional nature. It's not just about buyload and sell high. We consider appreciation to be the icing on the cake when it comes to our real estate investments. The reason we say that is because appreciation is not it's not as predictable as cash flow.

One of the other dimensions of real.

Estate cash flow is pretty darn predictable. When it comes to real estate investing, you'll see that landlords actually benefit from high interest rates. Landlords benefit when it is harder to qualify for loans because it puts upward pressure on their rents. So this improves our cash flow as investors. Now, many times I have talked about how money is on sale in not one way, but two ways. Most people think of money being on sale as well. Interest rates are low. They're the lowest they've been in what, three, four decades?

Very good thing.

But also there's another dimension of the money sale and that is ease of qualifying or ease of obtaining loans. Now this ship is leaving the dock. I want you to understand, as I have been trying to say for years now to our listeners, that you have got to do what you do when every other product is on sale. When you go to a store and you want to buy something and you see that it's on sale. I bet you do just what I do. When it's on sale, you probably stock up. Well, you know what money is on sale, it's still on sale, historically speaking. So point is, money has been a little bit cheaper in recent years in the post 911 world, but it is still historically very, very cheap. The deep fundamentals of this real estate market are incredibly good. As long as you buy right, you buy prudently, you buy in the right markets. But I want to caution you, don't just run out and buy properties in these markets. You have to look at not just the macro market, but the micro market, the areas of each city. Is it on the north side, the south side and then within those areas, north, south, east, west, city center within those areas, what are the right neighborhoods within them to look at? What are the right tracks of homes to look at? Who are the best builders to be dealing with to purchase from? What are the best styles of properties? Single level, two story. What type of architectural style is most appealing? What community amenities do you want to have? I want to really caution you, please do not listen to market profiles where we talk about macro city markets. That is not enough information. You need to talk to our investment counselors and our area managers and get the scoop on the exact micro market within that city that you need to pay attention to. Because you can buy in the right macro market but still make mistakes because you're not in the right micro market within that macro market. Make sure you talk to us about details when it comes to those markets. So without further, without further ado, why don't we listen in to this live tape here?

Another Getty quote. Buy when everybody's selling, sell when everyone's buying. Problem with real estate is this is great advice. By the way, this is how he became a billionaire because he bought up.

Oil company stocks in the Great Depression.

When they were really cheap and everybody was selling them. So this might be good advice for us as real estate investors.

Right?

The problem is this when people invest in real estate, they don't really understand.

Fully what they're buying and selling.

I say that real estate is not a one dimensional asset like most people think it is, but it's at least, and there are really more dimensions than this, but it's at least a three dimensional asset. Three major dimensions of the real estate asset. Men's Health, another non real estate publication. Interesting article in here. It says 10 incredible trends that will make you rich. And this alludes to that asset shortage issue that we discussed a few minutes ago. It says, build your castle 2020 in an investment strategy, will the future find you secure or struggling? Gaze into the year 2020 and discover where your money needs to be. And here this graphic is kind of a compilation of an indie Indian and a Chinese architecture all in one. And the little call out here says India plus China. They will control more than 50% of the world's gross product. And to illustrate the concept of how that rising economic tide floats almost all the ships. And there's this huge asset shortage and the wealth that will be created from these two and a half billion and 50 additional people playing a big part in the economy. Is this on page 77? This is kind of a funny thing, but it says, if China really prospers, think about how much Botox you can inject into 2 billion Chinese foreheads. I mean, just note all of the markets for goods and services and it's just amazing. Another thing I want to bring to your attention. My friend Gary purchased an investment property, property from us, his first one. He never owned a rental property. He owned lots of houses over the years, but never a rental property. He said to me, you know, I really like this property investment because I've invested in everything pretty much. I've invested in oil and gas exploration. I've invested in precious metals, gold mines, stocks, bonds, mutual funds. They can always create another stock. You know, that's just someone's idea taken to the public market through an ipo. There's another stock, no limited supply. They can always find another gold mine. They can always find another oil well that hasn't yet been discovered. But all real estate has been discovered. I mean, really think about the incredible wisdom of that statement and the impact of it. Every piece of real estate on earth is mapped and cataloged. We know it's there and where it is. Now, granted, there is a lot of vacant land on earth. I understand that, but I'm not investing for land values. I'm investing for improvement values. And the way the structure of the.

Taxes and the debt works, as we've talked about today.

And then this one was kind of interesting because this is the Wall street journal in January 13th gem war. These are real diamonds, only they cost about 15% than the other stones of similar size and quality. The reason they were produced in a lab, they're real. They're not fake. They're real diamonds. They were produced in a lab. How a new generation of high quality diamonds is shaking up the jewelry world. People invest in diamonds. That's an investment. And so with real estate, it's all been discovered. We all know that the supply is limited other than colonizing Mars, the moon.

And the lost city of Atlantis.

That's my disclaimer.

The other great thing about this type of investing is, you know, how many of you are homeowners. You know that when you bought your home, you probably got all these things in the mail from mortgage companies, right? Little checks, you know, and stuff like that saying, you know, here's a check for $49,000. Just apply for a loan with us on your equity. Well, the great thing now is I'm getting all these on my rental properties all over the country. So this one is.

Which property was this?

Oh, this is on my Chapman Falls property in Richmond, Texas. And this says GMAC, we'd like to loan you $49,000. And folks, I've only been doing this out of state investing for just over two years. It hasn't been that long. These are several of them from Countrywide. You probably get these for your own house. And this one says you can borrow $18,096. I don't know where they got that number, but some computer. This one says you can borrow 100,000, you know, this one says I can borrow $17,988 in equity. This one's $18,423, folks. It's like I got all these little banks all over the country. Isn't this great? This is the refi till you die plan. You don't get them right away, by the way. I didn't get these immediately. They had to kind of see season a little while, develop some equity. But it really starts to happen and it's just a wonderful, wonderful feeling. J. Paul Getty's quote. People don't understand the multi dimensional parts of the real estate asset they're selling. What are you really buying or selling? Well, one of them is the property price and its future potential. This is the one most people are very obviously aware of. The second one is not too many people people are aware of is the mortgage. The mortgage is a major part of the asset. I just cannot stress that enough. The mortgage is one of the biggest assets in the real estate deal. Interest rates have ticked up just a little bit since they're low, but they're still very low.

Historically.

One of our investors who doesn't get it, who doesn't understand how to calculate rate of return and frankly, he just won't listen. So this guy's going to shoot himself in the foot. And by the way, he is a commercial real estate broker. You would think he would know better, but he's too smart and you can't tell him anything. He's decided his property isn't that great an investment. I offered to buy his half out, he split it with someone else. I offered to buy his half out and I come to discover that this thing is way better than I thought it was because he has a single.

Loan on it for 5.5%, 30 year fixed.

Wow, what a deal. I mean, think about it. That is something that can no longer be replaced. That loan, you can't get it today. So that asset, even if the price of the property has not appreciated at all, say that were the case, the mortgage has become an asset relative to the owner because every other owner or buyer that comes after him has to pay more for the money. That mortgage can no longer be duplicated. And like I said before, in the next five or 10 years, two classes of people, those who stocked up on this cheap debt, easy to qualify for debt while they could, and those who missed the boat.

Don't miss it.

You will really, really regret it later.

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