2333: Real Estate Investing Insights: Navigating the Golden Age, Housing Market Secrets, the Lock-in Effect & Stubborn Sellers

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Jason has taken the time to actually really educate his people. He's big on education, and that's true to my heart because we are big on education. I always say that the financing part of this entire orchestra, real estate investing, is the piece that is most often missed. And so why education is so important to me and why I align so much with Jason, because he's so big about education and he walks the walk and talks the talk. He really takes the time to educate himself. So the information he's giving to his investors is the real deal. So I respect and appreciate that very much.

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 greetings from beautiful Sedona, Arizona. If you are watching me on video, you get a glimpse, just a glimpse. I know this isn't the best view ever of the beautiful Red Rock Mountains behind me. It's just, what a spectacular place. I've always, I've always been impressed by Sedona. And not only that, the energetic vortex. I wonder if that's true. You know, I was asking Grok about that the other day and basically the conclusion was, some say it's true, some say it's not. What do I mean about that? Well, if you know anything about this place here, Sedona, Arizona, there's a lot of iron content in the rocks, in the dirt and the soils, and there's a lot of talk, a lot of people who believe there are big spiritual vortexes that influence your energy in big ways here. I don't know. You know, I'm open to the question. Not sure. Neither is Grok. Grok is not sure about it either. This is sort of on the edge of science. But remember, things that are on the edge of science today are sometimes Proven tomorrow. You know, we tend to think at any given time in history, we have all the information, we know it all. I mean, stuff that we thought of and dreamed of 50 years ago are present today. And back then, they would have been considered magic. They would have been considered just completely magical. Right? And, you know, it's just an amazing time to be alive in so many ways. And speaking of which, let me kind of dive a little deeper into that amazing time to be alive statement. So what do I really think when I say that? What am I really meaning? Mostly, I'm talking about when I say it's an amazing time to be alive. I'm talking about technology, science, and really standard of living for most people. I know it's mixed, of course, but for most people, the standard of living just keeps getting better and better, and things just keep getting better, and we just take it all for granted. You know, if you read that great book the Rational Optimist by Matt Ridley, I've talked about it before. You know, it really makes you understand a lot of this stuff, and he points out a lot of these details. We think we've got all of these tragic problems. But, folks, let me tell you, throughout history, these problems look tame compared to what our ancestors tolerated. But I do want to distinguish that from the cultural situation, or you might even call it the culture war. I think the way the social world works nowadays is pretty bad. I think it's pretty messed up. So when I say it's an amazing time to be alive, I don't mean that in every way. I think in a lot of ways, it's pretty tough out there. So, you know, we've all looked at the statistics and talked about depression, suicide, health issues, social issues, dating issues, loneliness issues. I mean, it's. It's a tough world from that respect in a lot of ways nowadays. So it is, of course, as always, a mixed bag. Okay, I want to talk to you about many random things today. First of all, let's start out with inventory. So inventory is up and down. What do I mean by up and down? Well, it's up 24% over last year at this time. But compared to what earlier this year, it was up 32% over that previous month last year. So inventory has actually come down a little bit relative to last year and relative, of course, to 2019. It's way down. And historically it's way down. So the inventory numbers look interesting. But I will tell you, I just want to share my own personal experience as a house hunter right now, a buyer in the market actively looking for the last just over three months I think it is. And I have also spent several days up here in Sedona looking at properties too. One of the great things about the Sedona market, I've looked at a couple dozen properties up here already over the last several days. It only takes a few days to get to know this market. And you know, I just gotta pat my own self on the back. I know I'm gonna get negative comments. Jason, why do you do that? That's so annoying. But hey, I'm gonna do it because I go into these cities and it's just really interesting how when you've been doing this so long like I have, you really know how to learn a market quickly. And I would say that I've learned this Sedona market pretty darn well in just the last several days. And of course the Phoenix Metro market, not all areas of it, but many areas of it, I have learned that extremely well over the last several months. And of course I've, you know, purchased and sold properties in that market for many years. So nothing new there. But we do have our Phoenix Property Tour coming up and our JHU Jason Hartman University event. So Education plus Property Tour, that's going to be a really exciting event coming up at the end of September. Go get your tickets for that@jason hartman.com phoenix and come and hang out with us in person for almost two and a half days. It's going to be a fun time. And these are small group events so it's really nice because we'll get some close contact and you'll get to meet our team. It's just going to be great. So join us for our Phoenix Property Tour and educational event end of September. Jason hartman.com Phoenix for those tickets. Okay, so that is the inventory picture from one perspective. Here it is from another perspective. So calculated differently, it's pretty much the same thing on a relative level. But again this chart, it would show that there's about 800,000 homes for sale in the U.S. active listings only. And on this chart because it's calculated differently, realtor.com, 1.1 million but again all the same relative numbers. And if you go back pre pandemic inventory still very, very low and demand getting a little higher in the last few weeks, we have the lowest mortgage rates now in 10 months. I know they're still too high. I agree with you. But the lock in effect is a real deal. So back to my own experience for a minute. I have made several Offers on properties, personal residences in the Phoenix metro, mostly Scottsdale, Paradise Valley and a little bit of that Biltmore area, which is technically Phoenix address. So I cannot believe that I have not had an acceptance of any of these offers yet. I am surprised. Some of these homes have been on the market a while. One of them that I've still got a live offer out on as we speak. It's been on the market for about seven months. It is vacant. The seller moved out of the property. It is a high end, expensive property to carry and we are about $300,000 apart, the seller and I. And she just won't take it. She basically said, nah, I'm just going to wait, I'm just going to hold on. No big urgency. Even on these high end properties and on lower end property, that was just like a million eight. That's not lower end, but it's lower than this one. I got beat out on multiple offers that was on the market. I don't know, five days before it sold I was 75,000 below list. And they probably got full price. I don't know yet because the deal hasn't closed. But I'll soon know the selling price of that one. And it is amazing to me how truly should I say stubborn or should I say unmotivated these sellers are. They are just not desperate. You know, I'm expecting when I have, when I see a vacant property and a seller who's moved out who's paying double housing cost, I'm expecting them to be super motivated and make whatever deal they can. And they're like me, I can take it or leave it. And so far they're leaving it. So it's the lock in effect, folks. These people have either 100% equity because remember, 40% of the country has no mortgage. Now that's a terrible financial planning tool. But the way they view it, you know, the property is not very expensive to them. They just have to pay taxes, insurance and maintenance costs and utilities, but they don't count the opportunity cost on all that money locked up, sitting there doing nothing. Right, but that's another discussion. Opportunity cost is the most expensive cost most of the time. So keep that in mind. And then the other ones just have really cheap mortgages that, you know, it's just not a big deal to carry the cost of the house. So that's where we are. That is the lock in effect, folks. So we'll see how it all plays out. All right, so housing affordability has improved in these 11 places. Here we go. Oakland California, which is a terrible place to live. Massively overpriced, high crime, and just not a good place to live. Okay, but you only need $244,000 to afford the median price house, right? That needs to be your income, right? And West Palm beach, my old hometown area, $129,000. So affordability has improved there again. And Jacksonville, $94,000. San Diego, $227,000. Tampa, $97,000. This is the income needed. Now, remember, what is the typical income? Right? You know, it's like 65, $70,000. So these people all need more, except in one place, St. Louis. They're hovering right around the median income in the country. And the affordability actually has increased in these places. So that's kind of a miracle.

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But here, let's look at the deficit of homes listed for sale nationwide. The last time we didn't have a deficit where we had a slight oversupply, we had a surplus of homes for sale was 2011. Ever since then, we have been running deficits, shortages under supply of housing, and the experts say that this will continue into 2032. Now it's fair to ask, well, Jason, what happens in 2032? We'll tell you exactly what happens if we reach equilibrium where we have a balanced market. That'll be great. Hey, look, I'm a Libra, so I'm into balance, right? Those scales, the only sign in the zodiac not represented by an animal. And some of you think, why is he talking about this stupid astrology? Well, I'm talking about it because it happens to be fairly accurate. I mean, I wouldn't bank my life on it, but it sure is interestingly accurate. And I don't mean reading that stupid Entertainment Daily horoscope in the newspaper. But you must admit that the general characteristics of one sign versus another are very different. This is the oldest personality assessment in history, right? And there's got to be something to it. I mean, it seems hokey to me, too. I know, I agree. And I never believed in it until years ago. I had this assistant, Karen, who might be listening. Hi, Karen. If you're Listening and she kept commenting on our different clients that would come into my REMAX real estate office. And she said, oh, that person's a this or that person that. I'm like shut up, this is so dumb. And then I started reading it and reading some of this stuff and reading about it and I thought this is uncanny. I don't want to believe in this. It seems really just dumb. It happens to be pretty accurate, you know, it really does. So check it out anyway. That's me. Libra sign of balance. Right. The scales. And we're not going to be at equilibrium until 2032. They say what happens after that? We're just in a normal market. And then I get concerned about the real estate market around 2048 because the demographic cliff. But you've got a lot of time to make money, folks in real estate or also in the notes on the real estate. And we have been selling a lot of notes to all of you clients. I know you like these because you're bored with real estate right now. Nothing too exciting going on. 3.7% year over year appreciation according to Case Shiller. Right. And nothing too exciting. Everybody likes real estate when it's going through the roof and they're having to compete on multiple offers and having to overpay. Right. That's when everybody buys. They get all excited then. But maybe it would be better to buy before that next cycle. Right? Just something to think about. Anyway, people like our notes a lot. You know, 12% one year notes, very little inflation risk, virtually no management. I mean, you know, I always say there's no such thing as a passive investment, but it's a very simple investment compared to owning the property. So if you're interested, go to jason hartman.com click on the properties page and then there's a little section up there in the upper right hand corner about notes and you can see the inventory of different notes and trustees we have for sale. And you can earn 12% backed by real estate with lots of equity. Commercial real estate by the way. So why is that important? Well, on the residential lending, when you buy a note or make a loan on a residential property, you have more regulations. Dodd Frank, you know, all of this stuff that, that 2300 page bill that they passed coming out of the Great Recession. So a lot more rules in the residential side of the business where in the commercial side of the business, if you're lending on a commercial property or buying a note where someone else lent on a commercial property, then those borrowers don't have all These massive crazy rights that they do in the residential world because the way the law views it, the way the courts view it, as they say, look, you're a business person, you're engaging in a commercial transaction, you're supposed to know what you're doing. You know, we don't have to coddle you in the residential world. You know, we have to coddle you. So it's kind of different and just something to keep in mind. But, but these notes have about 48 to 52% loan to value ratios usually. So there's lots of equity, lots of padding protecting you from downside risk. And again, they're short notes. One year, 12%. Check them out. Jason hartman.com Click on Properties and then look at the note inventory in the upper right hand corner of the properties page. We don't have a special section just for notes. So now I was talking a moment ago about these stubborn sellers, right? The sellers that just aren't motivated really to sell. All the crash, all the doomers said that there would be a big crash. Sellers would be unloading their properties left and right. Yeah, inventory's up a bit. Big deal, big snooze fest. Nothing to write home about. Right. But what's really interesting is people who can't sell their properties because they won't meet the market at the market price, they're delisting their properties. We have some of the highest delisting rates now that we've had any very, very long time. So check this out. I mean, you put your property on the market, it doesn't sell, you refuse to lower the price. So you just say, I'll take it off the market, who cares? I don't need to sell it. No urgency. So here are the metros that saw the highest ratio of D listings of new listings. Like they listed their property and then they decided, nah, I don't want to sell it, I'll delist it. So Miami 59. Right, 59. So that means homes delisted per 100 homes listed. Okay, yeah, 59. And that's up from 27 in May. So very amazing, right? People just, they're not going to sell them. Right. Phoenix, where our upcoming JHU event and property tour is at the end of September. 37. So 37 out of 100 people list their property and then they just decide to take it off. Right. And that's up from 30 out of 100 in May. So that's a higher, higher number, but not as crazy as Miami. Riverside, California, you know, Southern California. That's where I'm from. 30, right? That's up from 18 in May. So again, interesting how there's just so little urgency by these sellers. They just aren't freaking out like all the doomers said they would. And I said they wouldn't freak out and I was right because there's just not that much urgency. The lock in effect is making this real easy for them to just float their properties and keep them longer and wait. Okay, so median sales price now this survey, this is a Redfin survey, it's up 2.1% year over year. The prior number I quoted was Case SHILLER and that's 3.7, although they may have released another month since then. So maybe it's changed a little bit. But yeah, prices still going up, not falling. There are some markets where we've seen some falling prices, but still it's relatively mild and just nothing to write home about unless you're in Austin, Texas and you've seen, you know what, about 14, 15% declines in your prices. A couple of Florida markets, pretty tough as well. Not as bad as Austin, but pretty tough. But overall, still nothing would be considered at crash level even after we triple the cost of money and held it that way for over three years now. It's just a crazy, crazy time. And the thing that is saving the market is the lock in effect of all of this super comfortable people who control the housing stock that have a very low cost of keeping that housing. So they're just not motivated. All right, so inflation, you know, the Fed's inflation target number is about 2%. They're playing the Phillips curve, comparing inflation with unemployment. Right. And so they're trying to balance this out. Right. And I would argue that Jerome Powell is not trying to balance it out. He's just trying to make sure he makes everybody suffer because he's in a fight with Donald Trump, which is very immature. But they're still all people. Right? You're over, you're changing the Consumer price index, the CPI for all urban consumers. That's the CPI dash new. That's the most popular one. There are other CPIs, by the way. And then of course, you know, there's the core rate or core inflation. And what that means is they strip out food and energy because they're too volatile. And they just tell us what inflation is without that. So the all items are here in the red line, down at 2.7%. If you look at food, 2.9% inflation shelter the highest inflation in the index at 3.7%. And then all items excluding food and energy. That would be core inflation or the core rate at 3.1%. So it's pretty interesting to look at that always. And just an update on the inflation rate. Remember inflation induced debt destruction is that wonderful, beautiful, incredible, fantastic hidden wealth creator that income property investors get and love. Looking at this chart. This is the dollars purchasing power. I've got two charts to show you on this for different time periods. And it's just kind of interesting to walk through history here. Since the creation of the Federal Reserve over a hundred years ago, right. The dollar has lost a massive amount of its value. I think the number is it's lost about 96, 97% of its purchasing power. But that's too long a period. What's happened recently? I mean it has been so crazy lately that just since 2020, in five years, the dollar has lost 28% of its purchasing power. So this is extraordinary what has happened. I mean, we all feel like everything is so expensive nowadays. I know, I definitely feel that way. You go to a restaurant, it is unbelievable how much everything costs now. And I think this is the reason, by the way, I've said this for the last 21 years. It's the reason older people tend to be more frugal because they remember the way it used to be. Whereas young people, they don't have a reference point, right. But now you don't even need that long of a time frame for reference. Five years will do it. Think about it. Think about our clients that were buying from us in 2020 and they were buying properties and say they had $1 million in mortgage loans. Say they bought four properties. They borrowed a million dollars to do it. Well, in five years they got paid $280,000 to borrow that money. Yes. Their loan balances decreased by $280,000. Not by them making payments, not by the tenant paying down their mortgage, simply through inflation induced debt destruction. That is a miracle. That is the most incredible, powerful behind the scenes wealth creator. So here are some comparisons on this chart, right? What $1 buys versus 19, 13, 30. Hershey's bars, right? You can't do that today. 10 rolls of toilet paper and it just goes through history and sees what it buys. You know, you've heard of this, the Big Mac index. That's something economists use to compare the price of a Big Mac around the world. Just look it up. It's, it's interesting. I don't have a anything to show or share with you on that today. So here is from 2000. So this is the last 25 years the dollar has lost 45 of its purchasing power. So I was in the real estate business in 2000, of course, but I was in the traditional side of the business. But we had some investors and even regular homeowners that bought properties from us back then. Basically their mortgage balances have gone down by 45% just to inflation alone, not due to their payments or anything else. And remember that 28% number I shared in the last five years? Or the 45% number in the last 25 years? Guess what? That was only the official numbers. It was not the real numbers, which are much higher. We all know that the CP lie, the cpi, the consumer price index is massively understated. And there are arguments about how understated it is. But we all know it, we all feel it, we know inflation is much higher than they're telling us. And so that is what we have. We have much more inflation induced debt destruction than either of these charts have just told you we have. So congratulations. Now we are living in the golden age. It is an amazing time to be alive and so much new wealth is being created. It is absolutely shocking. So here's an article about AI. AI is creating new billionaires at a record pace. Alexander Wang, a 28 year old co founder and former CEO of Scale. He has a net worth of $3.6 billion at age 28. Okay, I mean, and here's his co founder, this is Lucy Gow. She has a net worth of over $1 billion. You've heard of Dario Amade? Because I talked about his manifesto recently. He is the co founder of Anthropic and he has a net worth over $1.2 billion. The co founder and CEO of Core Weave is worth an estimated $10 billion. I mean folks, the wealth that is going to be created through the technological revolution, this golden age that we are living through, the age that our ancestors have been dreaming about since the beginning of time, it's here. And the wealth that will be created for almost everybody. This is the kind of wealth that will be very, very nicely distributed. Now of course you don't have to become a billionaire and be an AI company founder, but you're going to get all the benefits and conveniences of that. You may not get a lot richer in dollar terms, but in terms of standard of living terms, the standard of living is going to just massively rise because all of the efficiencies that will be created and the competition that will be created to get the price down as low as possible. So you can attract as much business as possible. Guess who benefits from that? All of us consumers. Our lifestyle just keeps getting better and better. And all of the stuff we use, the things we use, the tools we use every day just keep getting better and better and better and nobody notices. Everybody's just taking it for granted. Right. I really encourage you to notice it. I remember when I was 17 years old, I discovered four great mentors. Earl Nightingale, Zig Ziglar, Dennis Waitley, Jim Rohn, Og Mandino. There were really more than four. Okay, but let's talk about Earl Nightingale. Okay, Earl Nightingale on. I bought the entire Nightingale Conant library of cassette tapes. It'd be much cheaper now and much easier to access that information. But back then it was cassette tapes. And it cost me thousands of dollars to buy this library, but I wanted it. And I was listening to one of Earl Nightingale's cassette tapes, and he said, think of all the servants that you have. The average person has the equivalent of 200 servants in terms of hot and cold running water. Right. That was the example he gave. I mean, we all take that for granted, right? People didn't used to have that. You know, just not too many years ago, I was researching air conditioning and fans and how people used to live. Recently, I just replaced an air conditioner in one of my properties. By the way, I think I found a really good contractor in Florida for air conditioning. So if you need one, reach out to our team. I was researching this. And do you know that the fan. Yeah, just the, like a house fan that blows air around. Not air conditioning, just the fan was not even invented until the 1880s after the Civil War. Right. So think about that. Before then, they were talking about how people tried to keep cool and it's hard to sleep in the heat. Right. They were talking about air conditioning and how it changed everything on some of these things I was researching. And it's just like we just don't even realize all these advancements we have. You know, when I grew up and hey, I'm not even that old. Well, maybe I am. I don't know. It's all compared to what, right? And when I was younger, I remember, like, having a nice colored TV was pretty cool. A lot of people had them, of course, but, you know, there were still black and white TVs back then. I mean, I remember one of my black and white TVs that I have in like a second bedroom, a little 13 inch black and white TV. I sold it at a garage sale I had when I was Like, I don't know, 22 years old or something like that. So, you know, things have improved a lot, folks. Okay? Just really be appreciative of that and use it. So 498 AI unicorns now worth $2.7 trillion. 100 of them have been founded in the last two years, plus 1300 plus startups that valued over $100 million. They're not a unicorn. A unicorn is over a billion dollars. Right? Mega rounds are minting moguls. Anthropic reportedly targeting $170 billion. Open AI, $500 billion in a secondary round or that's their secondary stock, right? Like, like the SpaceX stock that I bought. Mira Murati's new lab raised $2 billion as a seed round at a 12 billion dollar valuation. Any sphere raised from 9.9 billion to 18 to 20 billion. This is amazing. Most wealth is illiquid, but tender offers secondary markets. Acquisitions loans against equity are providing growing if limited liquidity. The boom is Bay Area centric. San Francisco now counts 82 billionaires versus New York's 66 billionaires with surging luxury real estate and rents tied to AI demand. Why it matters. This is not just tech hype. It's a rapid reordering of who owns tomorrow's profits and where they live. If history rhymes, today's concentrated ill liquid fortunes will chase more AI bets before rotating into traditional wealth management, reshaping financial services, urban economies and inequality in the process. Folks, this is the golden age and the kind of prosperity and the kind of money that will be chasing the real estate properties that you own. You can create these new companies and all these new billionaires and 100 millionaires and you can create this pretty fast. But notice that in the time all this wealth has been created in this past two years, not many new houses have been created. Very limited supply of that real estate. A lot of new supply of dollars to chase it. Classic definition of inflation. A limited supply of goods and services. With a large supply of dollars chasing those goods and services. We all know what happens. We've seen that story before. Demand for adjustable rate mortgages hits a three year high. Normally I and for a long time because we've had low rates and good fixed rate mortgages for a long time, I have rarely been in favor of adjustable rate mortgages. However, if you can get an adjustable rate mortgage now without having a prepayment penalty, or at least not a significant prepayment penalty attached to it, that's not a bad deal. If it's a lot cheaper because we all know rates are going one direction in the macro scheme of things. They're going down and it's taken a lot longer than we thought it would be to get here. But we know the rates are coming down. Powell's out. Trump is pressuring them. All of the indicators say rates should be lower. That's why I I would take an adjustable rate mortgage today. I think it's totally fine to do that as long as the delta between the fixed and adjustable is enough and there's not a big cost in refinancing it when you see lower rates into a long term fixed rate mortgage. So it all depends, right? Be sensitive to the market. Don't say never. Never say never. Don't say never. Get an adjustable rate mortgage. That's a terrible idea. Not always. There are markets where ARMs adjustable rate mortgages make more sense and this is one of those markets. Now it's all subject to the rates you're offered and so forth. The adjustables aren't as good as they used to be. They don't have these incredibly low teaser rates like they used to. But if you can save some money for a period of time and look at refinancing within six months or a year somewhere around there, you're probably going to be in very good shape. Okay, that is it for today. Be sure to register for our Phoenix Property Tour jasonpartman.com Phoenix we will also have a full day of education at that event. Yours truly teaching it Jason Hartman University as well. These are nice small group events so I think you'll really like it. Not a big production like Empowered Investor Live, just a smaller, intimate type of setting for our Phoenix JHU and Property Tour. And then be sure always to register for our monthly master classes@jason hartman.com Wednesday. Check out the website if you're interested in buying notes. If you already have an investment counselor and you want to get that fixed, easy return on investment for one year. We've got 12% notes and those are phenomenal. Just buy them, hold them for a year and get some good yield on your money at 12%. So check that out at Jason hartman.com click on the Properties page and look at the notes in the upper right hand corner of that page. Or just reach out to any of our Investment counselors at 1-800-HARTMAN until next time, happy investing.

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