2075: The Coming Perfect Housing Storm

This show is produced by the Hartman Media Company. For more information and links to all our great podcasts, visit hartmanmedia.com I just wanted to say, you know, Jason, I've been following you for a long time. Ten years ago is when I first saw your course. And I'm telling you, the way that things have played out are way better than you projected. For me personally, obviously it's been, you know, a good six years, but now I'm ready to kick it into high gear is, you know, I want to really build a portfolio that's, you know.

Five or four or five times what I have already.

Obviously your advice has been fantastic. It's been life changing for me.

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.

Good day, empowered investors, and welcome to episode 2075. 2075. So last night we had our monthly meeting with our Empowered Investor Pro group and we announced two big new things, one of which I will share with you here, and that is our Empowered Investor Guides program. Your fast track to wealth and prosperity, where you can get some close, personal, individual hand holding. Our Empowered Investor investment counselors can also do this for you. But we have brought on guides with specialization. Deep, deep knowledge, deep experience and deep specialization. And last night we had two guides present on how to fire your property managers. And we have a domain name set up for this, which is fireyourmanagers.com Thought you'd enjoy that one. If you are unhappy with your property manager, we can help you solve that problem in a fantastic way. And that is to convert your tenants into tenant buyers where they will put up much, much larger deposits, deposits of maybe six to ten times what you're used to. And they will be responsible for many more things. You can eliminate your property manager, you can eliminate your property management as well. Okay, so this was a great presentation. A lot of people signed up for this program last Night. It's a small group coaching program that is launching on November 20th. So if you're interested in in having hassle free property ownership, some really interesting and unique tax advantages. I've always told you that. Wimpy from the Popeye cartoon, I know, it's kind of funny, taught me about inflation when I was a very young kid and his line was I'll gladly pay you Tuesday for a hamburger today. Right. Because he understood the time value of money. You'd rather get the benefit of something today and pay for that benefit later. Well, what if you could control large amounts of money and not pay taxes on them for two, three, four or even five years? I mean as many years as you can negotiate. But the typical is going to be two, three or four years. Right. So this was a really interesting sort of side benefit to the FireYourManagers.com guides and the talk and the presentation that we had last night. We also announced another big announcement initiative, but we'll tell you about that one later. So today we have Melody Wright, the bearish housing forecaster on with us again. So we're going to dive deeper into that topic and we'll see if she's right or if she's wrong. But regardless, remember income property is this beautiful multidimensional asset class. So even if prices soften that, I mean just look historically pushes upward pressure on rents because people can't buy. So there are fewer buyers. Now we're in this situation now where we have fewer buyers and we've talked about this about 1,250,250,000,000,000 times on this show so we don't need to go into it again. But we have this funny situation now in this market where we have lower demand, demand destruction caused by the higher interest rates, but we still have very little inventory and increasing prices, just like I predicted and all of the others said there would be a crash, that real estate was over with these high rates. And even before the high rates they said it's just a bubble, it's just too expensive, yada yada yada. You heard all this stuff, right? And as everybody was saying that, I was saying the opposite and I predicted exactly what has happened. Now don't believe me? Just go back and listen to my old episodes. The thing about me is the record is recorded forever. So all you have to do is just go back and listen to the episodes from last year or the year before or 18 years ago and you can hear what I said back then. And you also get some of that on our flashback Friday episodes. Yeah, my predictions have been pretty darn accurate, except for interest rates. Those I do not want to predict because I'm not good at predicting interest rates. Anyway, go to FireYourManagers.com to learn more about the program we discussed last night, and several people signed up for that. So we're really excited to have them on board and we welcome you as well. Also, there is a fast action discount on that. It's not quite as good as the one offered last night for the pro members because they get discounts on everything. We always discount everything we do for pro and mentoring members, but there's still a good discount on that because we want to kick off this program and have it be very successful. So are you ready for a soft landing with the economy? A soft landing? Well, economists, a lot of them are starting to say, you know, as gloomy as it looked, it does look like the Fed is going to be successful at engineering a soft landing. Well, let's see. Let's look at some major indicators. If you're watching on video, you see this rather complex chart and graph on the screen. And it profiles monthly job gains, it profiles the unemployment rate, it profiles wage growth and cpi Consumer Price Index U, which is urban, which is the most commonly used CPI index, inflation rates. Okay, so how does that all look? Well, the unemployment rate has surprised everybody. As much as the Fed is trying to push it up. It is very, very low, almost really what's considered by most economists to be full employment. In other words, everybody who's willing to work, everybody who wants a job can get a job. Okay. You know, the only reason you don't have a job is just because you're a lazy sloth. Right. Or you're too picky. Right. So it could be, could be the too picky thing. But the fact is there are lots of jobs available and wage growth is pretty solid. I mean, it's growing right now technically at above the rate of the official inflation rate by a pretty good margin. It was lower than the official rate inflation rate when we had really high inflation last year. But wage growth solid. Okay, not bad. Not bad at all. How about the monthly job gains? So the monthly job gains have many times surprised economists and they've been much better than they thought they would be. Now this last report was just a little lower than expected. I guess the economists are getting a little more optimistic now. And the last report was a little off, a little lower than expected. Also, what's not on this chart is gdp, gross Domestic Product, which is surprising everybody how well that's doing. So, you know, the soft landing might be in the cards. Let's examine the jobs issue more closely. This next chart shows the COVID jobs recovery is complete and then some cumulative change in total non farm employment in the United States since February of 2020, seasonally adjusted. So it's smoothed out. Right? And of course, a lot of jobs were lost during the COVID era, but they came back above the lost jobs. So it's the COVID jobs recovery being complete and then some extra bonuses again, doing very, very well. You know, look at the negative equity rates. I think I might have talked about this a little bit on the last episode, but houses just aren't underwater. I mean, hardly any. Any houses are underwater now. So the likelihood of people walking away from those houses, extremely low. And here's another interesting kicker that I've been researching. The equity position for homeowners is really high. People have in general, I mean, other than the very, very small percentage that is underwater, which is like 113 of what it was during the Great Recession. So very few people are in any kind of distress in terms of negative equity. But. But wait, there's more. For the people that do have equity, they have a shocking amount of high equity. And guess what? The lenders and the high rates are keeping them from accessing the equity. Oh, interesting point, young grasshopper. So the banks have overcorrected coming out of the Great recession the last 15 years. They are being extremely conservative. They're not allowing people to tap their equity, and the interest rates are making it too expensive to tap the equity. So with those two factors coming together, people are just riding on big, big, giant clouds of equity in their house, and they're not taking it out. So they're not using their houses like ATM machines. And they have a lot of skin in the game, as the expression goes. And that skin is staying in the game, keeping them from ever, ever wanting to walk away. Not to mention that they have the lowest mortgage interest rates in five millennia, quite literally. Read the book Debt the First 5,000 Years by the late David Graeber. Fantastic book. If you want to know more about that. I've talked about it on many past episodes. Overall, the weighted average combined loan to value ratio for all mortgaged homes in the US is only 45%, among the strongest we've seen dating back more than 20 years. That's unbelievable. I mean, people have massive amounts of equity in their houses. Even if you see a giant softening in prices, which I don't know what would Cause that. Because, you know, we've examined every factor under the sun ad nauseum on this show. But even if they do, they have a giant cushion. I mean, if. If we have a giant recession, including not just a general economic recession, but a housing recession, and prices go down 20% or 25%, I mean, that would just be devastating, most people would think. But these mortgaged homes would still have massive amounts of equity. They wouldn't be underwater. They would be far from it. They'd be very much above water. And this is only the mortgaged homes. Remember, always think about what is the person or the article or the speaker or the guru or the commentator or the pundit not telling you. Sometimes what they're not saying is the most important thing. You can't hear the dogs that don't bark. And you've always got to answer the question, compared to What? Well, this 45% loan to value. 45%, meaning they have 55% equity in their homes. That's only for the homes that have mortgages on them. 42% of the homes in the country have no mortgage at all. So they have 100% equity. How do you get a crash out of this? I don't know. As of September, 383,000 or 0.7% of mortgage holders were underwater less than half the share prior to the pandemic and in the early 2000s, before the global financial crisis. So, like, virtually nobody is underwater. Okay. You know, there's like three people,.7% of mortgage holders underwater. Remember, there's still 42% of the homes with no mortgages at all. Okay. Likewise, the number of borrowers in limited equity positions remains historically low, with 1.9 million, or only 4.2% of mortgage holders having less than 10% equity in their homes. These people are like a picture of health. A picture of health. And here was an interesting tweet from the Hustle. It says, and you know, of course, we just. For those who change their clocks, right? We do this twice a year. This crazy tradition of changing our clocks all back. You know, it's silly, but that's what we do. And we got to get rid of that. We got to change the law about that. But the Hustle tweeted, if we're turning the clocks back this week, can we at least turn them back to a year? You could afford a house. Remember, housing affordability is terrible, the lowest it's been in 40 years, which does nothing but put upward pressure on rents. And yes, rents have decelerated, but they're still increasing. There's a difference. Okay. Deceleration means they're just the increases are slowing, but there's still increases. Okay? So that's an important, important thing to understand. And I got some really interesting data I'm going to have to share with you next week because this is about housing affordability. And for those watching on video, you can see this chart. I gotta take a deep dive with you into this. It's interactive, it's from the Atlanta Federal Reserve bank, and it's really quite interesting. So we'll talk about that next week. We gotta get to Melody right today and finish up that interview. So let's go ahead and do that. Remember, go check out fireyourmanagers.com if you want to get big fat deposits from your tenants, if you want to virtually eliminate management and definitely eliminate managers, so you increase your cash flow immediately and that will help you a lot. Also, check out empoweredinvestor.com for our pro group where you can watch and access all of the past monthly meetings that are recorded. Then you can access them live every month after that. All right, let's get back to Melody. Write.

Some of those homes aren't really meant to be Airbnb homes necessarily. There were a lot of people in the world before Airbnb even existed. I mean, I've been in this business a very long time that had second and third homes, you know, people with, with some means. Right. And they didn't even rent them. Now Airbnb just gave them an opportunity to make use of them and get.

Some multi million second homes in this country right now.

Okay, got. So not all of the Airbnbs. My point being that I agree that there's Airbnb shadow inventory. No question. I'm just saying. And in some markets it's profound. Okay. Like there's a lot of it in places like Arizona, in Phoenix, Metro in Austin and Nashville and Vegas. Yeah, those markets are oversaturated with Airbnb properties. Okay, totally. But not all of those properties will ever end up hitting the market.

Totally. Okay, yeah, but, and so that's just one component. Right? So then we go to the build to rent. And so what this was is, you know, first the institutionals got involved and they sort of hired these builders to build these spec homes for rent, like American homes for rent, Starwood, Blackstone, etc. And so there'd be whole subdivisions of these things built. And when I went out on the road, it would be really kind of interesting you would go to a subdivision that wasn't completed, there'd be one home completed, just one out of like 200. And it would have a little for rent sign right in the yard. And so, and these were typically in your excerpts, like you know, the idea was supposed to be rental, theoretically affordable rental. But then, you know, the institutional started pulling back American Homes for rent. They've become net sellers except for one all in the family deal recently between Starwood and Blackstone. But they have stopped this and American Homes for Rent has actually sold some of these subdivisions that they were building for rent as single family homes. And so what happened is the institutions got in. Then every, you know, Tom, Dick and Harry wanted to get in as well and they started this almost like a multi level marketing thing where but you would contact a broker and say, hey, I want one of these long term rentals. You know, and what that broker would do would go out and find and you'd read a pamphlet and sight unseen you would kind of build this respect. And so that's a lot of what was happening. And now out on the road what I've seen are tons of these empty subdivisions of this build for rent that is, you know, going to put pressure because then we move to the multifamily which you know, construction at this point is the highest since the 70s. And you and I might disagree on this, but we don't have the demographics to support it. And so what you're seeing in a lot of the same cities that have that over saturation of the short term rental and the bill for rent, because they're the sun built happening cities, they also are getting a ton of delivery of multi family. And I've got a great schedule and I'll share it with you later if you'd like to see it for a visual of what those deliveries look like in these cities which are already sitting at apartment complexes, that's correct, multi family apartment complexes. And so they're already sitting in a pretty significant above average vacancy even before kind of this multifamily is going to hit at the same time the built for rent and at the same time you're going to have some of this short term rental. And a lot of people, what they did is they pivoted from long term rental to short term rentals, especially if they were trying to get financing because you could use certain technologies in this space, like air, DNA, look up a property and it would say to you your average daily rent is X and your average occupancy is Y. But so one in one of my substacks I do a great example of a property in Kyle, Texas, which happened to be a property one of my mortgage clients has, where it was a second home and likely built for either short term or long term rental. But the technology I was using said that they would get $600 a day in Kyle, Texas, which is 22 miles south of us. I can't imagine that that's not going to happen. And so a lot of people were led to believe that they would make a lot of money. And the DSCR lenders, I know, I know responsible lenders in this space, but they relied on that technology as well and really kind of said, okay, what can you make? And so people pivoted from long term rental to short term rental because you can make $10,000 a month, theoretically, versus, you know, that 2K you might have made with a long term rental. And so that's another component. And then, you know, I talk about the demographics.

Okay, well, wait, wait, wait a sec. You went back into short term rentals? Yeah, so I thought we were talking about build for rent.

So I was just kind of, I just kind of gave an example that that's these spaces bleed over. And so as people realize they could get more for a short term rental, they pivoted to that. And so, you know, that took a lot of the long term rental off the market actually. And so that bill for rent made a lot of sense as rents were skyrocketing during COVID because people thought that we had a paucity of long term rental as well. But what had actually happened is people pivoted more to short term rental. So.

Yeah. So on the long term versus short term rental, most of those short term rental properties are more expensive properties that don't make sense as long term rentals. Okay. You know. Yeah. I mean, some aren't, but most of them are higher priced. And the rent evaluations aren't good on long term rentals. And that's why these people are in trouble. Okay. Because they can't get the properties to pencil. Had they purchased a bunch of entry level houses, you know, they could just turn them into long term rentals and it wouldn't be a problem. But you know, when you own a $700,000 or $1.5 million Airbnb property, you can't convert that and make it make sense. Not even close. So those tiers of the market are going to suffer more because they're going to dump a little more inventory into that market. But on the build for rent though, Melody, that's what I Wanted to ask you about is who owns those build for rent properties? I mean those are institutional owners with big money. And you know, are they the ones you're saying are or will be in distress or ferret that out for us a little?

Well, they've already become net sellers of these. They got out early 22. But it was your smaller mom and pops that kind of got involved was when I was down in Florida, was there recently, you know, talking to someone in this build for rent space. And it became local groups, like groups of smaller investors that wanted to do this. So it just, it's how it always goes, the institutional start. And then everybody thinks it's a great idea. They start piling in and. And things were starting to not pencil. And so this gentleman I was speaking to told me he's a lone voice still the room telling people you got to stop. Like, you know, and one of the big builders, he was working for an institutional, they were putting like 200 homes in the ground like every month. Like this was, it was a huge factory. But it all kind of died down in 22 and those institutions became net sellers. And then you had sort of more of your smaller investors kind of get involved. And those are the ones that I think, just like I was kind of explaining to you, I'm Joe Schmo, I want to buy a long term rental, you know, help me find one. Where can I find one? And I gotta tell you, these people contact me on Twitter all the time, you know, looking to invest in a space, looking for that one property that's going to be, you know, their passive income. And so we have a lot of smaller mom and pops that took on leverage in this space. And this is where, you know, I, I wasn't going to talk about demographics, but I can move to mortgage now if, if you want to because it's. It kind of plays here.

Well, you know, I'm kind of wondering on, on the build to rent space. I mean, I guess your point is that those portfolios that the institutional owners purchased are going to not perform very well in terms of appreciation. That's right. But like I always say, people only have three choices, Buy, rent or be homeless. Yep. So if they stay in the renter pool, that'll ultimately put upward pressure on rents. I mean, rents have decelerated a bit, but they've decelerated from like a crazy fever pitch, so.

Well, I think that's because people misunderstand the inventory picture and how much of this is out there. And I did a great substack called down and dirty. That goes over the permits. How much are slated for build for rent out there? And so when you have the build for rent and the multifamily together, they're going to be competing. And so a lot of the build for rent.

When the build for rent you're saying is single family home. That.

When you say single family homes. Yep. And the multifamily.

So what you're saying, big apartment complexes.

Apartment complexes, is that in the excerpt you have a lot of this built for rent kind of farther out, but in, in nor more close to the cities. You have these beautiful luxury multifamily buildings that, that are just popping up everywhere and there's too many of them. And so these people are going to be competing. So your, your multifamily and your bill for rent as well as any of your short term rental people that want to stay in the game and maybe are going to list for long term rental, which we see that. And that's one of the reason I track all three is kind of how the listings move from listings for sale to listings for rent to short term rental. And so that's what I think a lot of people are missing is that the inventory is exploding in many, many cities. And again it's, you know, real estate's local, but then it becomes ultimately a national narrative. Go ahead.

Inventory of. Just be specific.

So I. Housing inventory. So I'm talking about all housing stock. And a lot of people I think miss this because they talk about one component. They talk about listed for sale vs what's listed for rent vs what's the short term rental. And so they missed that all of this housing stock that's out there because it seemed like it all disappeared because Wall street bought a lot of it up in 2012, 13, 14. It didn't disappear. It just went into the long term rental market. And then ultimately because those homes for sale were off the market, then our builders started getting involved and that's. We haven't even started talking about that, which is, you know, and they're building not just for.

But the institutional. The institutional owners own like somewhere around 3 million homes.

It's a lot.

Yeah, yeah, that's. That's. I mean compared to mom and pop investors who are renting properties they own about. Well, there's a total of about 18 million or so, maybe 20 million out of the housing stock of 140 million units.

Those numbers are firm when. Right.

Like so, yeah, they're a little hard to get a handle on these numbers.

Because they're census numbers and we don't get updates on housing stock every year like we do. Population totally get it, but I'm just.

Saying, like we're going with what we can get. Okay, so, but my point is that the institutional build for rent owners of single family homes are. That's a bigger number than ever. But compared to the broader market, that's still not that big a number.

So again, this is why this is multi layered. And so all these numbers add up and so we. So I'll move quickly just the demographic piece because here I very much. There is a Harvard study in January about how we pull forward household formation during COVID And so to me, and it gives some really nice charts and graphs and. Sorry, I, I would have brought it for you, but it shows basically what we can expect in the next, you know, five to 10 years. And it is less than what most people are thinking by just looking at pure numbers. And I think I heard on the show you talking about household formation as well. So that, that's a great study out there as well as. Let's take affordability. I think at this point now, of course, when homes become affordable, we'll have a lot of demand, don't get me wrong. But of the unaffordability right now, everybody is going to be looking for the cheapest cost of living. And that's going to be a battle between, you know, homes for sale and homes for rent and the multifamily for rent. And so then we get to kind of the new build. So everybody talks about the fact that we weren't building because of 2008, et cetera, et cetera, and they look backward. And so to me, I'm looking forward at our demographics. We're not having babies the way that we used to. We have boomers retiring who by the way, are primarily the owners of those second homes, third homes, fourth homes, and what they're experiencing right now and as they go into retirement is that the cost to carry that home is increasing exponentially. Especially in Florida where insurance is four times the national average. Your taxes are going up because they go off that assessed value in many states.

Right, but if that goes down, then your argument is, I mean, the taxes.

You know, if it, if it goes down, absolutely. But I'm talking about the next. Yeah, three to five years. Right. So ultimately these boomers also realize if they were doing, and a bunch of them have contacted me, if they were doing long term rental, they're starting to get, hey, I could go invest in short term treasuries I could go invest in money market funds. I can make my 5%. Why am I dealing with headaches of pipes breaking, toilets need fixing, et cetera?

You know, there's a great X account that everybody should follow. It's called. The guy's so pessimistic, but he might be right. It's called Triple Net Investor or something like that.

Oh, I've seen that.

Yeah. And he compares like, everybody wants these like passive income triple net lease deals. Right. And the one he had the other day was a Chick Fil, a land lease. You probably saw it and it yielded only 3.5%. You can make more money in Treasuries.

Exactly.

But you know, to be fair, that's not really the full picture because of course, there's. The land could appreciate the Treasuries. You know, you can't get that for 30 years. Right, yeah.

Listen, long term, like, that's not my, you know, argument, but we've got 10,000 boomers retiring.

He did have a point, though.

Yeah, yeah. It's like, you know, we've got those 15 million vacant homes. Those are money for some of these seniors, you know, and they're going to start kind of trying to catch that cash. And this is a good moment because they could make it elsewhere because they're not going to be around for the next upcycle. And their kids, unfortunately, at this moment, again, they can't afford the upkeep. I mean, they, they literally can't afford it. So, you know, I think that, that, that is a big part of these seniors kind of coming out and unloading some of those homes. So the, the builders, I think everybody was looking backward and, and very strong on the narrative that we hadn't built enough. Not really realizing that all of those houses kind of got bought up by the institutional investors as well for long term rental. And we've become more of a rental country, which never thought that would happen in my lifetime. I remember being, you know, yelled at for not buying a house. And, and now, you know, according to certain sources, like Redfin, there's only four cities left in the country that it's, it's cheaper to own than rent. And so, you know, these are the choices that a lot of people are being faced with. And so the builders kind of went in gangbusters. And it's not just the nationals. So that's what I think a lot of people don't understand. People like Zellman, people like Zonda, they have a lot of the builders on their platforms and they have A lot of that inventory, but they miss that as soon as the nationals get involved. The locals also, kind of just like you have a CVS right next to a Walgreens, they come onto these sites, these mega sites, and start building as well. And so it is. It's unbelievable when you go out on the road and go to one of the mega sites and you've got Lennar, dh, Horton Pulte, John Cannon, all these different. And then all the local builders. And so there's a real misunderstanding about how much of this new build inventory is out there. And because of the survey of construction is, number one, a survey. This is how we get our permit data. There's been some misunderstanding of that as well, but I think you can even see the amount of homes yet to be delivered this year is a bit staggering. And what's interesting, let's take Lennar, for instance, in the last Hubbub, you know, they basically delivered, I think, around 38, 000. And there was this big article how they said they went crazy, they tried to build too much. This was after their.

You probably saw Logan Matashami's article, right. He's been on the show before and he said, new, new home builders, only 76,000 homes. Right. And that's just not enough. Like, is his point.

Well, no. So that. And that's. So I haven't seen that article, but I would quibble with this. Yeah. So Lennar itself is on record to deliver over 70,000 this year, which is so that like two times what they did in the. In this article where they're saying we went crazy, et cetera. So one thing that the Fed doesn't capture is cancellations. And so, you know, cancellations are if I say, hey, builder, I want you to build me a new home, we sign a contract, et cetera, and then.

We cancel tons of cancellations when rates went up because the people could no longer afford the house. That's right. What nobody talked about except yours truly, is that those people that canceled would then go and buy a cheaper house as soon as their psychology got in line with. With reality. Okay.

A lot of them are building up, right? Like, at least in what I've seen out there, they were building up. They were hoping to go from their starter home.

So they were hoping to go from an apartment and buy a first home, Right?

Sure.

You know, but they overshot, you know, when the. When the cost of money tripled, they could no longer afford that house. So, you know, I mean, one of the points that nobody catches Melody and It drives me crazy is that people simply, and it takes a little time for them to capitulate, but they will just ultimately accept less. Because humans have to do something right? Like, yeah, maybe they're not going to get as nice a home as they expected. They're going to have to adjust their expectations ultimately. And that's exactly what happens. That's what happened with all these builder cancellations that happened when rates went up. I predicted that. I spoke about that publicly. I remember being on stage in Las Vegas with 1100 people in the room saying that was going to happen before it. Months, like six months before, before it happened. And then it did happen. And the news, I said, you're going to hear this in the news. I had slides about it. And the point is people then recalibrated and they bought a cheaper, lesser house. Tough luck. That's the way it goes. You have to, you know, grow up. You have to just accept less. Okay.

Right. And, but unfortunately what's happened is everybody, the builders kind of went crazy. And again, I'm not just talking about the nationals and they didn't see kind of the whole picture. And so a lot of these, these cities that I've been to, where I've traveled and there's a lot of video in my sub stack etc of these developments, people weren't talking to city planners. They weren't really understanding. Like in Round Rock, Texas for instance, mile after mile of new builds because they thought of Amazon, you know, warehouse was coming, which it never is. And so we have, and I'm saying this and people are going to freak out, but we have overbuilt and now we have a structural issue like a lot of what's being built out there is way too expensive for your regular home buyer. Everything I've seen on the road is up north of 400k, except of about three to four of the hundreds of new build sites that I've been on. And so we built for luxury just like we built multifamily for luxury. So are there affordable homes out there right now? Absolutely not. But what I think will ultimately happen when people understand how much inventory, like this city I went to, Lakewood Ranch in Florida. You almost have two, two houses for every person there now. You know, when this gets really realize, similar to the way Lennar got its tax bailout last time, I think that the government will probably or likely come in and subsidize write downs as long as the builders sort of pivot to affordable homes. And they're already doing that. There's a lot of government subsidies out there for these for affordable home programs. And it's going to become a very political issue in my opinion in 24. And so you're going to see a lot of the builders pivot to affordable housing. So that's one because another component that.

But can they like what, what does affordable mean? That's such a moving target because the cost of construction is so ridiculously high.

That's a hundred. That's exactly the point. And so again likely the government will probably have to subsidize those write downs because there will be significant write downs. When you look out there today at all of the inventory that's north of 400,000 and you realize that you know less than $25,000. $400,000. Right. That you know in less than 25% of our US population can afford that like there is going to have to be write downs. And so you know, it, it's a matter of time. But I do believe the government will likely intervene but it's not going to save some of the builders. And, and you know, I think a lot of the smaller ones we'll start to see. There was a great, great tweet just this week from what he's an anonymous account at a top 10 builder and they had a Sunday phone call that where they were told that they were starting to. They're going to give the lots back to some of the developers. Now it's probably lots that were scheduled for 24 or later but I think that with the 10 year, with 10 year treasury yield where it is in my industry that's we watch that thing with that happening, I think that you're going to see some builders sort of have to Maya culpa here as we get to year end.

The question probably everybody is asking after this interview is so what do I do right? And the thing I always say is compared to what? Right. Okay. Your view of real estate is not so rosy, at least in the short term. But what else can you do? Like what are you going to do if you have capital and you want to grow your capital? Do you have a recommendation? Well, you know, or is your recommendation real estate even with everything you said? I don't know.

So I think that if you can make deals. Pencil. Right. I think this is the time for negotiation. I think, you know, there are distressed sellers out there. We're seeing inventory increasing, you know, what some may call a non seasonal time. I think the distress is kind of starting and you can actually negotiate. But honestly when you can get a 5% return with not doing much of anything. It might just be a good time to kind of wait and breathe. But again, you know, this is not investment advice.

The only problem with that 5% treasury return is it doesn't last very long in full five months, you know, six months. You gotta. You gotta go do something else. Yeah.

But, yeah, if you're not leveraged. I'm a big believer in hard assets, but that, you know, when people take on too much leverage, that's what really concerns me.

Yeah. Melody, we could obviously talk about this for three days, which I would love to do sometime, but just go ahead and wrap it up for us if you would, and give out your website.

Sure. So, you know, kind of just last words, I would just say that I'm looking at all housing stock and sort of layered on top of demographic. So, you know, what I would encourage everybody to do is something we talked about at the beginning of the show is not rely on one data metric. Right. Kind of triangulate. But, you know, would love for people to check me out if they have questions about some of the things I've talked about here today. You can reach me on Twitter @m3underscore. Melody. Melody, why? My substack, m3melody substack. My YouTube, m3melody, YouTube, and of course on LinkedIn @. Melody Wright. But I just want to say thank you so much and thank you for having me on the.

Show. Melody Wright, thank you for joining us. Appreciate having.

You. Yeah, thank you so much. Thanks for having.

Me.

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