2189: Multifamily Housing Crisis: Delinquencies and Market Outlook

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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, empowered investors. This is episode 2189 and I am still in beautiful Belgrade, Serbia. And it is a hot day here, but I must say, it's not that hot. It's not any hotter than the summers I experienced as a kid. It's 86 degrees. You know, I walked around the block just a few minutes ago. It's not bad. It's. We have a name for this. We call it summer. Yet my phone is blowing up with heat. Severe heat advisory alerts. What's behind all of that? Well, I think it's just an agenda, but that's a whole nother topic. All right, what do we have going on in the real estate market? It might be summer outside, but let me tell you, the real estate market is kind of frozen. And it's been rather frozen since the rate hikes a couple of years ago. But I will say in the past several months, it's even more frozen because we are seeing a situation here where a lot of buyers, just the typical owner, occupant buyers, not really you investors as much. Everybody's kind of, you know, it's kind of like A Mexican standoff, as they say. Oh, gosh, I probably just offended someone. Sorry. So they're waiting for the Fed to cut the rates and these sellers are saying, hey, look, you know, we don't want to sell because why would we go from 2.75% to six and a half percent on our mortgage? That's just crazy. We would get less house and pay more money. No one's doing that deal. Right. We're seeing a very quiet real estate market in terms of sales volume, yet we're still seeing prices increase. And here, if you're watching on video, this chart is pretty interesting. It is the average monthly principal and interest payment on a 30 year fixed rate mortgage versus the median monthly household income. And as you can see, incomes have gone up, but also mortgage payments have gone up significantly in comparison to that income. There used to be this nice big margin where people were in a situation where they could get a lot of house for their money. And that's what people have been used to for a very long time, almost five years now. But now we're seeing a more normal type of situation where people are really, really struggling to buy this high priced asset. And here's a question, you know, it begs the question, what is it about people that make them think things need to return to the way they used to be? Why is it that housing can't just be for many years to come? Of course there will be adjustments and ups and downs in this along the way, but the overall megatrend may well be, and I think it is, that housing is just a really expensive asset. It would be like someone asking, why can't everybody just afford a Rolls Royce instead of a Toyota? I mean, what's the answer to that question? Things do not have to return to the way they used to be. Housing does not have to get a whole lot more affordable now. We're on the verge of maybe a Fed rate cut, right? You know, there's, there's a meeting literally today, okay. And I can't wait to see what they say because it is about time, Uncle Jerome Powell, that you give us a break and cut the rates a little bit. Just give us a quarter point. Everybody will be happy you did. But the problem is, look at the problem here on this chart. It shows you that the inflation problem cannot be solved in terms of housing without massive amounts of new supply. That is really the only, only answer to the problem. So what does this mean? Well, it means that the rental market is underpriced and it means the rents are too Damn low. Remember that character running for office, you know, years ago? The rent is too damn high. The rent is too damn high. The people I'm in residence can't afford to pay the rent. Cause rent is too damn high. The rent is too damn high. He had a point. But what makes you think the rent can't get too damn higher? I mean, you look around in foreign countries and people live in much smaller houses, flats, they accept a lot less for their money. They live in tiny little places. And that is normal around the world. It's only in the US that we have these high spoiled expectations. Right. You know, I saw a funny thing on Facebook today, on Facebook, and it was a woman who posted a thing saying she was talking to her uncle in Pakistan and her uncle did not know what the word woke meant. And so she explained it to him and his response was these people in the west are just too darn spoiled. They've never had any real hardship in, in the last maybe two generations. And so they're just looking for something to do, you know. And I'd say that's a pretty accurate statement. And when you look at housing and you compare it to that, it's just the expectations, they've been formed over the last five decades in an era where we went off the gold standard, where the government could spend, spend, spend without any tether, where in, except for a few periods, we really had relatively low overall inflation compared to the rest of the world. And the expectations are in for a rude awakening. They're in for a big adjustment. Housing could remain just a high priced, out of reach luxury for many, many years to come. I predicted during the pandemic that this would happen. One of the other things on a much smaller scale I predicted is that restaurants, the idea of going out to eat, that something, you know, people didn't really do that very much in the 50s, at least not in the fancy way we do it today. They didn't have these food delivery services, they didn't have all these luxuries, they didn't go to nice places and they certainly didn't go out often, right? Going out to dinner was a special occasion in the past, but it became this normal thing, right? And I predicted during the pandemic that going out to dinner would, would be a new like luxury thing. And in the US that's certainly true. So there you go. Average monthly P and I payment on a 30 year fixed rate mortgage compared to median monthly household income. That gap has shrunk a lot. And houses have become a lot Less affordable, which means that the difference, the arbitrage between renting and owning, renting is now really a better deal. And that means rents are coming up. It just takes a while for it to adjust. The rents are always lagging the prices. And if interest rates go down, the houses will get a little more affordable, but then the demand will increase and that will put upward pressure on housing prices. So it's just a really messed up situation, frankly, the whole housing market. But it's a huge opportunity for us as investors. At the same time, let's look at delinquencies. When you consider hardship out there, right? When you consider the folks trying to predict a real estate crash, well, one of the things you have to look at, of course, is are people in trouble? Are they overburdened by their mortgage? Are they over leveraged? Are their payments on their existing mortgages just too darn high? Are they going to get into trouble? Are they going to go into default? Are they going to go into foreclosure? Well, not likely. Now remember, it's a completely different story for people who are already owning houses, existing owners versus new people entering the market. The two are diametrically opposed. They have a completely different worldview. Entering the market today, high payment, unaffordable, et cetera, et cetera, entered the market a couple of years ago. Super low payment, incredibly comfortable, incredibly affordable house. But we're also going to compare this single family homes versus multifamily apartment complexes. And you're going to see that those two asset classes are also diametrically opposed. And think about this. When you hear a report in the media that real estate is in trouble or real estate delinquencies have increased, you got to always ask yourself, what type of real estate are they talking about? They talking about single family, they talking about multifamily? Or are they talking about an even worse asset class, which is office space or any other asset class for that matter, in the real estate world. Okay, so here is the serious delinquency rate for single family homes where they have loans from the two biggest mortgage players on planet Earth, Freddie Mac and Fannie Mae. And here you see that we have extremely, in fact, historically low serious delinquencies. In fact, almost nobody. Like it's almost statistically insignificant the number of people in trouble with their mortgages. Again, they are extremely, extremely comfortable. In fact, I was reading a report, if you want the specific numbers, these are the percentages. And you see on the chart, if you're watching, they are very, very low. But the actual Number of people in serious delinquency situation, meaning they're more than 90 days late or they're in foreclosure on their properties. For single family homes in the United States. You want to know the actual number? It's seven people. Yep. Only seven? I'm just kidding. Obviously there's 140 million housing units in the United States. Okay. A lot more than seven people are in trouble, but that's about what it really is. It's like nothing. It's a, you know, I love that saying. Nothing burger, right? It's a nothing burger. There's just nothing going on in the foreclosure world in single family homes. Very different in multifamily. We'll look at that in just a moment. But look at this. This chart shows you the serious delinquency rate well below 1%. It's a nothing burger. Now compare this to the COVID era where it spiked well above 3%. Compare it to, to the Great Recession, the GFC, the global financial crisis, whatever you want to call it. Right back in, in 2009, as we saw these foreclosures coming through the system starting earlier, obviously the economic hardship started before that. But here is where we saw the peak of the foreclosure activity. That was at almost 6% of the market. So literally it was like 12x what it is now. Okay. It's just a non issue. Okay. What about multifamily? Well, that is completely different. That is really, really bad. In fact, it's the worst it has ever been. Since 2012, there are more multifamily properties in serious delinquency than there have been in the last really 13 years. I mean, just digest that for a moment. This market is in serious, serious trouble. That's going to take a few years to work itself through the system. But it will work itself through the system because there is still a housing shortage in the United States. And multifamily will benefit from that housing shortage problem as they have inventory to provide. It's very overbuilt. A lot of syndicators that got themselves into serious trouble by doing seriously stupid things. But it is what it is. So we will continue looking at that. Now I want to show you this and share with you this. You remember Gerald Celente, right? He's been on the show a few times over the years. You know, he's kind of an their little bit radical guy, right? I'll be the first to agree with that. But he wrote an email that I got the other day predicting Some things about the presidential erection. Okay, yes, I have to say that because I will be monitored by the thought police. Yes, the thought police are always monitoring this show. And the maybe most evil company in the world. What should I call them? Gargoyle. Gargoyle, yeah. Gargoyle runs the biggest email system on the planet. You're probably using their email system. So, you know, they have a corporate version that companies pay for, and then they have the free personal version called Gargoyle Mail that, you know, you get for free. Right. And obviously this company, Gargoyle, is scanning your emails and retargeting you and serving you advertising based on what's in your email. I mean, it's just. Just totally disgusting, right? This is a. An evil company. And now what they're doing is they're literally deleting emails out of your inbox. Here's what they did to me, and if you might see it on the screen. I posted this on social media, but of course, they don't serve it up to anybody. Anytime I. I post something that's, you know, not in line with the narrative. You know, like a very small number of people see it versus I post what I had for lunch the other day. You know, I put a picture of my L and hundreds and hundreds and hundreds of people see it. I mean, it's just absurd. It's ridiculous. So Gargoyle sent me this notice saying that this was. And it says, alert phishing messages. Message detected. Post delivery for gcalentesjournal.com and this was this email about the presidential erection. Right. And by the way, you know, I'm using that word to mean another word. Okay?

But. But yeah. So this phishing email, they said this was a phishing email. There was no phishing on this email. You know what phishing is, right? Where they're trying to obtain your address? There's nothing in this email that would by any means make it considered a phishing email. I know what phishing is. I know what a phishing email looks like. I am aware of these things. And they just deleted it. I skimmed this email when I saw it. It looked interesting, and so I saved it and it's gone. I will never be able to read this email and I will never know completely what was in it unless I call up Gerald, which, you know, he's been on the show a few times so I could ask him, hey, will you resend me that email? Well, Gargoyle will probably delete it again. I mean, if you don't believe the abuses going on I mean, think about. You cannot think about or evaluate what you never see. That's the situation we're in. It's Orwellian. So there you go. All right, our next Wednesday meetings coming up, we're talking about tax savings and asset protection with a totally new guest. JJ Childers is going to be on with us. That's Wednesday, August 14th. So register for that@Jason Hartman.com Wednesday. And be sure to register for our upcoming masterclass. We do these every month and we love to have you join us and it'll really help you become a more empowered investor.

The following is a blog post found.

On jason hartman.com blog navigating market analysis and Forecasts Data to Hold the Strategic Decision Making Today's ever changing market makes it vital that businesses have accurate market research and forecasts to keep abreast with competition. They empower entrepreneurs with priceless knowledge of what's happening on the market, consumer preferences and future prospects. Along this article we will see what are the techniques of market analysis or whether there are some new trends on motion or simply how your business can use this data to make efficient decisions with an advantage. Understanding Market Analysis Market analysis is a process of assessing a number of things that affect supply, demand, fluctuations in a specific industry or a relatively small market segment. It integrates both the qualitative and quantitative methods to yield objective results. Key components of market analysis include the Identifying market trends while application the historical data. The likeliness of noting the typology may occur. In this case the one should establish the phenomenon. Monitoring up to date market dynamics, including shifts in consumer trends, innovations and policy amendments helps you capture the attention as well as understanding the market as much as possible. Building on with those techniques for example the SWOT Strengths, weaknesses, opportunities threats analysis to evaluate the market environment, assessing competitive landscape study rivalry in order to know their strategies as they have their strong points and weak sides. Identify the market space in sum and narrow large gaps to come up with possible areas for innovation and differentiation. Doing the balance between the company and the brand image that match in the market and customer's point of view and the competitor's impact Understanding consumer behavior tailoring the target marketing with the help of demographics, psychographics and consumer behavior in order to have a competitive edge in the market. Carrying out surveys, head counts and market research to understand the preferences and needs of the customer, foresight to future needs of consumers by the business and tailoring its product or service offerings accordingly. Forecasting market trends prediction is of paramount importance in this context as it enables forward looking market trends comprehension and evidence based decisions making While predicting the future with absolute certainty is impossible, businesses can employ various forecasting techniques to make educated estimations Quantitative forecasting methods Time series analysis with the help of historical data to forecast future trends based on patterns and co occurrence.

Identifying connections between variables to look into the likely future outcomes Market Modeling Building mathematical models to duplicate market conditions and forecast the potential results in varying circumstances Qualitative forecasting approaches Expert opinion consulting industry experts and thought leaders to gain insights into future trends and developments Delphi Method Iterative consensus building approach involving multiple rounds of anonymous surveys to forecast future events Scenario planning Developing multiple scenarios based on different assumptions and assessing their likelihood and potential impact Emerging Trends in Market Analysis the panorama of market analysis is constantly changing as a result of technology development, shifts in consumers, lifestyles and global economic recession. Some emerging trends shaping the future of market analysis Big Data Analytics Using advanced big data analytics software to process high volumes of structured and unstructured data to generate meaningful insights Applying machine learning architectures for pattern recognition, correlation analysis and prediction Predictive Analytics Networking predictive analytics into decision making processes to suggest future trends, customer demand and the best use of resources. The application of predictive analytics in sectors such as demand forecasting, pricing optimization and risk management Real time Market Monitoring Using real time market monitoring instruments such as tracking market events, consumers perception and competitors activities. Ensuring that agile decision making is supported by timely responses to market volatilities and exploitation of emerging opportunities. Conclusion Market research, prognosis and analysis are the key instruments of the trade for firms in the business world of the modern era. By studying market tendencies, defining competitive forces and applying advanced forecasting tools, firms can work on fact based strategies, discover dangers and catch up with market windows. Ability to respond to new tendencies such as big data analytics, predictive analytics and real time market monitoring will be a key factor for staying ahead and surviving in a dynamic business environment. Among all business skills, the ability to use the market analysis and the strategic purposes will remain the most powerful.

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