2339: The Housing Deficit Explained: Millions of Buyers, Limited Homes and Why "Doomers" Keep Getting It Wrong

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So far the event's been fantastic. Lots of great speakers, so many good contacts. Just the amount of different people you see here and meet here is probably the biggest benefit. And the speakers are unbelievable. And it's jam packed with content. Basically can't miss a speaker. If you're on the fence at all about this, if you're even considering it, just jump on, do it. You won't regret it. You're going to be able to close those time windows that you think take forever. Just do it. It'll be a great experience for you as an investor and you're going to be able to learn just through osmosis, through all these great people you're around.

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.

Greetings, empowered investors, and welcome to episode 2339. We've got some good information coming up for you in just a moment. I've got some market data that you must hear, so stay tuned for that. Before we get to that though, I want to tell you that we've got a couple of big things going on with our upcoming event in Phoenix. We're just a couple of weeks away from that and it is going to be great because we've got two big, very new things for you. Number one, we have a way that you can get equity out of your properties, whether it be your personal residence or your income properties. And that method is super, super exciting. I have been studying this alternative form of equity extraction and equity stripping over two years now, almost two and a half years. And it is a way to get this equity out of your property without disturbing your low interest rate. First loan, your existing loan that you've got on the property, or, you know, if you own your property free and clear, you can do this too, but it's really good. If you have a low rate first mortgage that you don't want to disturb and there are no monthly payments. Yes, you heard that right. No monthly payments, no difficult qualifying, fast processing get equity out of your property. So for example, say you want to get another hundred thousand dollars out of a property you own. You can get this money without changing your debt to income ratio, without increasing your debt, without having any payments, zero payments and very, very easy qualifying for this. So it's a phenomenal opportunity. We're going to talk it at our upcoming event Jason Hartman University, soon to be changed to Empowered Investor University. But we're kind of between names here and our Phoenix Property tour coming up in just a couple of weeks. You can register for that@jasonhartman.com it's right at the top of the front page or if you want to go directly. Jason hartman.com Phoenix and our other big announcement at that event, this new type of property opportunity, which we have never offered before, but I've been studying it for about five years now, is something where you can potentially purchase a Property for around 550,000 and earn when it's fully occupied, earn $8,000 per month in income right around there. Those are approximate numbers. Different properties have different income and purchase price and so forth. But that's the gist of it, right? About 550 purchase price about 8,000 per month. That is above 1%. And you can do these kind of properties in the Phoenix Metro. Now this is a market where according to research, according to statistics, there are 25,000 units like this needed and there are just over 1200 of them supplied in the market. So if you want to have the supply and demand ratio in your favor as the investor, one of our partners got this property, filled it in four days, okay. And the cash flow is insane. It is so good. We're going to be touring some of these properties I on our upcoming Phoenix Property Tour. We're going to be talking about them. It's going to be excellent. So be there or be square. It's at the end of this month. Jason hartman.com you can register right on the front page and we would love to see you there. Our hotel room block is closing soon. This is a very inexpensive event. The format, just so you know, you come in on Friday night, we'll have a little reception around 7pm at a restaurant within walking distance of the hotel. Then Saturday morning will start at 8am get your breakfast, get your coffee before that if you can, or you can have your coffee in the room, but get there at 8am we're going to go till about 12:30 with education. I'm going to pack in a whole bunch of real world education, mostly about how to analyze real estate deals. And then we will get on a tour bus right around 12:30, 12:45, we're going to tour properties. Then we're going to come back to the hotel and you have a chance to freshen up and so forth. And then we're gonna have dinner after a short intermission and we are going to celebrate my birthday. I just realized that my birthday is right after this event, so heck, we might as well have some birthday cake too. And that'll be a lot of fun. And we're going to a really fun place, so it's gonna be a good time. And then we will meet again on Sunday morning at 8:00. And then we will have education and wrap up this tour and educational event probably four o'clock on Sunday afternoon. And you can fly out that night if you're local. A lot of people coming are local. A lot of them are flying from out of town and we'd love to have you. These are small events. It's not like our big event, Empowered Investor Live. It's not a big conference. It's mostly me doing the education. But we do have some other guests as well. And we are actually looking at properties that you can buy on the weekend of the event. Some of those properties have this phenomenal cash flow and many of the properties, most of them we're seeing are brand new properties from big national builders, properties we've hand selected because of our partnership with these builders and the incentives they are offering. Mortgage rate buy downs. As you all know, mortgage rates are declining and that's really refreshing. Purchase activity is way up already, but it's going to go up a lot more as these rates decline and really good incentives from these home builders. So again, really, four great reasons to join us for this event. I can think of four. Okay, number one, education and actual property tour. So we're gonna go see properties. We're gonna get on the bus together. We're gonna go see properties. Okay, number two, it's gonna be fun because you'll get to celebrate my birthday and that's gonna be a good time too. And if you have a birthday, we'll celebrate yours too, if you're a Libra. And then what else, what else? We've got these new property opportunities with phenomenal, phenomenal numbers. Again, the target for Those is about 550,000 purchase price, about $8,000 a month in income. I mean, you can't do that anywhere. You haven't been able to do that except like maybe St. Louis right after the Great Recession in about 2011. You could get those kind of numbers there. But we have not seen them since then until we started offering this new opportunity. And we're going to talk about the equity stripping opportunity and we might just have our rep there that can help you do this. But if not, I'll educate you all about it. And that is where you can get equity out of your properties with no payments, zero payments. You don't change your cash flow, you don't increase your debt. It doesn't show up in your credit report. It's just a fantastic opportunity to strip equity out of your property for whatever purpose you want. But one of the best purposes is to buy more properties. So that is like my refi till you die plan on turbocharge on steroids. It's just like a hyper version of refi till you die and really so much better because it doesn't increase your debt at all. So it's going to be a great time. Jason hartman.com Register for that. You know, I like packaged commodities and tangible assets when investing and that's why I'm sharing this solution. A powerful way to get paid on gold. You own gold, you get paid a yield on gold. Thousands of investors are earning interest in physical gold and silver with monetary metals. It's time you do the same. Visit monetary-metals.comhartman for special offers. Okay, now today I've got some really good market data for you and I want to get to that in just a moment. But so many of you been asking me about this scandal with Marco Santarelli. Now this guy for many years was my competitor. I always thought he was a cheater and just not a good guy because he would copy my information constantly. It was really annoying. You know, they say imitation is the sincerest form of flattery. Okay, great. But you know, this is just like stealing my intellectual property. He did it all the time. Other people in the industry said he did the same thing. Well, it turns out, you know, he was in a lot of trouble. We reported on that before. But now this trouble is getting really, really serious. So here is something from the official government website. Okay, this is the United States Attorney's office and it says former CEO of Orange county based private equity fund. Now this is Narada Real Estate and his equity fund was called Nerada Capital Management. I Think. But Nerada Real estate. Marco Santarelli, you know, that's who you're dealing with here. He was charged with conning investors out of $62.5 million via bogus promissory notes. Santa Ana, California. An Orange county man who was founder and CEO of a private equity fund charged with defaulting or defrauding hundreds of investors out of approximately $62.5 million. He sold these notes in, like, Broadway shows, real estate cryptocurrency. This is an announcement from the Department of justice. Marco Santarelli, 56 years old, Laguna Niguel. Charged with one count of wire fraud and is scheduled to make his Initial appearance on October 20 in United States District Court in Santa Ana. And it just goes on here to talk about this. So we'll follow this case for you. But apparently, in total, he caused more than 500 investors to lose approximately $62.5 million. You know, folks, this is another reason you want to be a direct investor. This isn't just Marco Santarelli. You're going to hear a lot more about this. And I said this easily 15 years ago, okay? All of these people starting these funds and these syndications and doing these deals, right? A lot of them that you think are reputable today, they're playing all sorts of games. They're either cheating billing expenses to the company that shouldn't be billed there. They're paying themselves big fees. They're literally doing a Ponzi scheme, which is what Santarelli's one of the things he's accused of, right? It says right here. In fact, Narada did not pay promised returns and interest payments. Instead, the fund invested in risky assets that did not provide the promised safety and security, was unprofitable, had very little return on investment, and a large amount of debt. The balance sheets that he sent to investors hid more than $90 million in debt and included inflated assets in Ponzi scheme fashion. Santarelli made interest payments to investors using other investors money. And you know how a Ponzi scheme works, right? Of course. You get the new investors to pay the old investors, not out of a return on investment, just to fake a return on investment. So that's what Bernie Madoff did, of course. And he says he got the idea from our Social Security system, which is kind of funny. And so here is the Orange County Register. It says, OC Investment Guru charged with bilking $62.5 million from clients. I've lost a lot of sleep and cried a lot of tears, said one alleged victim of the private equity CEO Marco Santarelli, and there's his picture. And it just goes on to talk about the crimes he's accused of. But look at these people that lost this money. This is so. It's so awful. Trista Yerkick, 44, of Dallas heard about Nerada from a Honolulu investment counselor. She checked out the company and found that Santarelli appeared to have a good reputation, invested $200,000 in October of 2023. By June of 2024, the monthly interest payments had stopped and Nerada gave her equity in the company instead. A company she believed had no valuation. And it just talks about some of these investors that lost their money. Here's another one that sunk $700,000 that he earned from flipping houses. A 71 year old. I mean, can you believe this? This guy's not going to get the chance to earn this money back again. $700,000. And I've met some of the people that have lost money in his scheme. Here's one that lost or that invested $400,000. It's just pathetic, disgusting. So hopefully justice will be served and he'll pay. Well, he can't pay the debts, obviously. You know, there's. I'm sure he doesn't have that much money, but hopefully he'll serve some time in jail and these investors will get something out of this because it's just terrible. Anyway, let's get to our main thing today, which is just a short segment from me. I just recorded this on Monday. It's just some good market information, some of which you have not heard before. So here it is. Contrary to the doomers, who are like broken clock write twice a day, the market is showing almost no distress whatsoever. I mean, it's just de minimis. You know, this is just a quick chart on. Everybody's got a disagreement on what the housing deficit is. Are we short 1 million homes or 7 million homes? You know, this is saying four and a half million in this particular chart and I can't remember the source. Usually when I take the screenshot I get the source in there, but for some reason, maybe it wasn't there on this one. But even with a new home building boom, even with the Trump administration saying they're going to declare a state of emergency, they've got a few levers they can pull. They're saying they'll do that this fall, possibly. Scott Bessette, our Treasury Secretary, said that, you know, it's just still a very difficult situation where housing affordability is very low, although it's getting a little bit better. Mortgage Rates have been coming down, and they're going to go down quite a bit further, I think, at least by the time Powell's out next year, a little bit before that as well. And here is the inventory picture. This, again, goes way back. So this is a long chart on inventory, way back to the 80s. And you see where we are now. And this is not adjusted for population, okay? So the population has grown a lot since then. You know, if you pick any point on this chart, the population is higher than it was on the date showing the inventory in the chart. And you can see here that we're at the inventory levels that we had in the 90s and that we had in the 2017 range, but we have higher population than either of those times. So, again, housing inventory per household or per person per capita, it's still very, very low. And this is a staggering chart. If you want to talk about the S and P and compare it to the S and P, it's just truly shocking because the stock market is obviously like any asset, a game of real versus nominal. You know, yes, you can look at the stock indices, and they're way up, right? But when you adjust for inflation according to the cpi, which is understated, every rebel capitalist will agree with that. You know, outside in the less aware world, they don't know that. But, you know, certainly in this space, people know that the CPI is dramatically understated. So based on CPI going back over 100 years, there have been almost no real dollar gains in the stock market. If you look at the S&P 500 as your index for it, it's barely up. Like it's just a nominal amount. And we know the CPI is understated. So if you took real inflation, you've actually lost money in the stock market. Except for dividends, dividends have been really the only return. And I'm not sure how many of the s and P500 companies pay dividends. I do need to look that up because I'm curious on what the average dividend is. But still, again, you're treading water, at best, in the stock market, even with these particularly good increases we've had. Now, if you look at the same chart and you just look at the last 10 years, you definitely did better. Okay? But you can see when the last tether to gold disappeared in 1971, that's when it all started. The fake appreciation, right, because of the inflation that that created. And so we've got to beat the stock market. We've got to beat inflation. And here's the way it works. Just a very simple example with real estate, right? One million dollar portfolio. Say that's three rental properties, they appreciate it 6%. If you pay cash, $60,000 gain, that's 6%. If inflation is 3%, your only gain is 3%. You're just a little bit of ahead of inflation, which isn't bad. But if you leverage those properties with 20% down million dollar portfolio, you put 200,000 down, 6% appreciation, it's the same $60,000. But because you have less money in the deal, that's a 30% cash on cash return. This is of course simplified. Now you're beating inflation by 27%. Okay. And that's just a pretty normal what most experts would agree that over the decades you see about 6%, okay, you can disagree with that a little bit. You could say it's 5%, 7%, whatever you want. But you know, 6% is about what most experts will say. We have overall right in nominal appreciation. Now if you look at a good year when you see some good appreciation and it goes to 15%, you know, for Tesla people, I call this ludicrous mode, right? But this is not really ludicrous at all. I mean it's happened many times, it's been higher than this during the COVID era, etc we saw appreciation rates higher than this. So you know, this is not that big a deal. But here's just for the example, it's the same million dollar portfolio, it's the same 20 down 15 appreciation is 150 grand. But because you've got so little money in the deal, that's a 75% overall return. And you take out 3% inflation, you beat inflation by 72% potentially, man. I mean you just in the property has special characteristics that you just can't get anywhere else except with a leverage buyout. You know, if you're a stock guru and you're doing deals and you know, you're T. Boon Pickens, well, I think he passed away. But you know, whatever, you know, any of these Wall street type Carl Icon, any of these Wall street tycoons, you know, the corporate raiders, you can beat this. But for the normal person, the only way to really do it is with income property. Because you're not paying the cost of this debt. Your tenant is, you know, even if you had to pay for some of it with called negative cash flow, right. You know, still you're just way ahead of the game. So just a couple more things as of this morning, okay? You can see the date on here, September 8th, okay. You can see that the real estate prices are still slightly up year over year. Even with this massive affordability problem that we have. Prices nationally are still up. And mortgage delinquencies showing the distress in the market decreased again, okay. In July. Okay. That's the most recent stat for this. It's as of today. Here is the typical delinquency rate, and we're below that. Okay? So there just isn't any real distress in the market. And as I always say, if you want to have a real estate crash, the one ingredient that is absolutely, positively necessary, you can't have a crash without it, is tens of millions of distressed homeowners who become millions of distressed home sellers. And without that, you're just not going to have any collapse in real estate prices. So that's the thing you have to have. And we have the opposite of it, you know, right now.

So I love it. And, you know, it's almost like I had brought this. I had this epiphany the other day. You know, I was thinking about, like an asteroid hitting the planet and, well.

That might mess things up. That would cause a shorter supply of real estate. So that actually might be good for the market.

I. I was just thinking, I was like, I was like, yeah, that could happen. But that's not really a good, like, retirement plan, right? Like, yeah, like, you're kind of reckless if, like, your whole thing is not really investing or doing anything. You're just kind of hoping the planet ends and everything goes poof in the next 10 years or something. And with the housing thing, too, it almost sounds to me like we're in this standoff where I guess consumer expectations. And you've brought this up in the past where, like, consumer expectations really haven't shifted to the new normal. So we're kind of stuck in this kind of Mexican standoff. Do you see, like, what do you see happening down the road? Do you feel like the economy is going to turn sour? Sour, and then you're going to have those millions of distressed homes, owners trying to sell their properties to get someplace more affordable? Or do you think there's going to be some financial engineering in the near future here that's going to make this the standoff kind of kaput after opportunities open up and you can start buying houses again for the cheap with a little rate? Like, what's your feeling?

I mean, look, there's always financial engineering, okay, so we live in a very engineered, centrally planned world. But there's just no question, it's just basic Math, what the inventory levels are, what the demand is, what the unresolved demand or shadow demand is from all the people who wanted to buy over the last three years that couldn't afford to buy. And when rates come down just a half a point, half a percent, 50 basis points, that's 2.7 million new buyers who can afford and qualify for the median price house. And if rates come down a full point, that's over 5 million. Okay. And if rates come down at a point and a half, that's about 8 million new buyers who can afford. And we have 800,000 homes for sale, you know, approximately. Okay, so what do you think is going to happen? Like, it's so obvious that there's going to be multiple offers, prices are going to be pushing up. There's going to be much more upward pressure. Like, let's just assume, you know, you can't do math and you are a doomer and you're just stuck in this, like, everything's going to collapse angle. Okay, so say prices don't go up. Well, then what? There's upward pressure on rents because the people can't buy, the population is still higher. There's still a lot of unmet demand. You know, I mean, it's just so simple. Like, I don't know why people try to over complicate this stuff. It's. It's just not complicated to know that there's a shortage, we have too much demand, we have too little supply. And that's just the reality of the situation for now.

Yeah, no, it makes a ton of sense. And I think. I think where people's expectations are getting a little messed up is they're waiting for something to happen and they, you know, it's a timing thing. It's more of a timing thing than it is anything else. It's like, when's this thing going to change so I have the green light to go do something as opposed to.

I heard all of those. All of those same people saying that in 2005, 2004, you know, 1991, I was in the business. I mean, I've heard that forever. And they just keep missing the boat. And then they just become really jealous of everybody who had the confidence to do something. And then they just troll everybody on YouTube saying everything's going to collapse. You know, they're all over Twitter, too.

Yeah.

You know, it's just this whole narrative is just not sensible.

Yeah, it's funny. I listed a Peter Schiff, like, back in 2018, 2019.

Yeah, the guy who's been wrong since 1982.

And he had me so convinced that everything was going to fall apart in the next day that I sold everything I had and I bought Physical gold. And I missed out on some of the biggest bull runs we had because I. I did the exact same thing. I drank the Kool Aid and I'm like, oh, it's all going to end. This guy's going to fall tomorrow. And I need to be. I need to hit the pause button. But, yeah, the big takeaway is like, like you, like you said, it's like you need to just look at the numbers.

And this is not an optional asset class housing. It's a necessary asset class. Okay. You know, people don't have to buy a stock. They don't have to buy gold. They don't have to buy crypto. They do need a place to live.

Shelter is pretty important.

Yeah. It's just. It's just a necessary thing and, you know, let them rent it from you. Thank you so much for listening. Please be sure to subscribe so that you don't miss any episodes. Be sure to check out this show's specific website and our general website, hartmanmedia.com for appropriate disclaimers and terms of service. Remember that guest opinions are their own, and if you require specific legal or tax advice or advice in any other specialized area, please consult an appropriate professional. And we also very much appreciate you reviewing the show. Please go to itunes or Stitcher radio or whatever platform you're using and write a review for the show. We would very much appreciate that. And be sure to make it official and subscribe so you do not miss any episodes. We look forward to seeing you on the next episode.