2367: This Week in Real Estate: What Every Investor Must Know Now

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All righty folks. We are 16, yes, 16 days away from 2026. Lots of us are wrapping up the year, but I have thoughts of 2026 and I thought I'd ask Mr. Jason Hartman what his thoughts are on six different variables and we'll play a little over under and see what's going on. How you doing, Jason?

Good, Michael. How you doing? It's good to see you.

Oh, absolutely. People love, love these interactions and where we take it. But so when I look out at 2026, kind of the, you know, there's lots of key variables, but the one I think everybody is watching, including the Fed, is the unemployment rate. And obviously, as you know, there's lots of different unemployment rate. U3, U6, all of that. We're going to talk about the one that's often reported, which is called U3, which I think was last reported at 4.54. Expected to go to 4.5. I think it comes out tomorrow. And what I want to ask you about 2026, Jason, is what's your gut tell you? Are we in a cycle where this is going to be rising in 2026? Will we touch 5%? Where do you think this thing goes in 2026?

So who was it? I just read it this morning.

Was it.

I often conflate the two together, but. And they're different people. Mark Benioff and Reid Hoffman, you know, tech executives, right? LinkedIn, LinkedIn and Salesforce. One of them said that they laid off 4,000 people due to AI. You know, I think we are moving into an era of higher unemployment. But I want to just recast the way people think of that, Michael, because, you know, we've all been really worried about the tech and automation and especially artificial intelligence specifically. But I just want to remind everybody of, like, some history here, okay? In the early 70s, there were many predictions about how people would only have to work three or four days a week and leisure time would expand due to automation and technology. And now everybody is viewing this as a negative thing. Every new technology throughout history increases productivity and decreases employment for a short time, at least. And then people figure out that they have more needs and wants because human needs and wants are insatiable. You know, I always say on my podcast, my YouTube channel, you've heard me say it, you must watch old movies, watch old TV shows, listen to old music, read old books, okay? I always say, I've been saying that for 22 years now, okay? And lately I've been watching a lot of Alfred Hitchcock, you know, that ran for 10 years, 1955-65. And it's just so interesting to look around people's surroundings and see what they had in their surroundings, right? In their homes, in their offices. You know, just look at the way people acted and interacted with each other. And it's so different than today. And back then, we could never imagine that people would have all these services and devices and products and gizmos and gadgets and just take one area of it. Maybe take two areas that show the standard of living is massively increased and that I'm going to take two areas that I just always think are kind of funny. I'm a pet lover, right? I love animals. I had a dog, passed away recently. But think of all the services and products people have for their pets, for their animals nowadays, okay? And it is insane. Like, the whole idea of taking your dog to a dog washer. Or better yet, having one come to you in a mobile van and wash your dog. Like, like that's just in an insane level of luxury, right? That is, nobody ever thought of that, right? And then another one. Just drive around your community, right? Because probably everybody watching and listening lives in a kind of a upper middle or higher end community. And you know, what is a proxy for how well the economy is doing or how rich an area you're in? Spas and med spas, okay? Where people spend all this money to make themselves feel better and look better. Like these are crazy luxuries, right? These are not things. Things that are normal, okay? We were just a few decades ago, no one could imagine that there would be all these new industries and all these new sectors that there are today. And so what will happen is unemployment will tick up as automation and artificial intelligence replaces people. But then people will realize that they've gotten more prosperous, the economic pie has grown, it got bigger and they just want more stuff. And you know, who knows what it's going to be, right? But I mean, certainly space tourism is going to be a thing, okay? High speed Internet everywhere is already becoming a thing. Self driving cars. The amount of money people will save with this technology is insane. Just think of self driving cars, right? Most people use their car about 4% of the time. So for 96 of the time that you own a car, it is being unused. It's sitting in your garage, in your driveway, whatever, right? I mean, my car is not being used right now. I'm talking to you, okay? And when we don't need a car anymore because we have CASS and that's a acronym, that's like SaaS with two A's software as a service. Well, soon you'll have Car as a service. Or maybe you want to call it ass. It'll be Auto as a service. Okay, whatever. This is all good. This is all positive stuff. The adjustments will happen, we will get through them and life will just keep getting better and better and better and nobody will appreciate it. The other thing, by the way, great book recommendation. Read the Rational Optimist. Oh, maybe that book is like eight years old now. I'm not sure. But I read it a few years ago and it just kind of one of the he talks about Matt Ridley, by the way, is the author talks about all these things that just keep getting better and better and better and like we all just take it for granted, you know, and so I'm not too worried about the unemployment thing. Yeah. So it is Going to tick up a little bit.

Okay, A little bit being where, let's say, let's call it four or five between friends today, you think next year it goes, you know, up to five, something like that.

Maybe a little less than five, but a couple.

Okay.

Couple ticks up, you know.

All right, so you take. I like it. All right, so. So up. Not horrible, like.

Yeah.

All right.

And by the way, that doesn't cause a foreclosure crisis. I talked about this extensively. I did a big research project on this because of the lock in effect and because all of these low Covid era rates that people have, 25% of the country mortgage at or below 3%, 65% of the country mortgage at are below 4%. Wow. Their houses are super affordable. Their mortgage debt to income ratio is only about 17%.

Yeah.

Half of what they could qualify for. They could qualify for double the debt load, basically. Right. So they can afford their house on the unemployment insurance. Will they figure out their next gig? Okay. You know, you got to have tens of millions of distressed homeowners that become millions of distressed homeowners to have a crash. We are so far from that, it's not even funny. Their houses are so affordable. It's incredible.

No, couldn't agree more. The next thing I think we got to talk about, obviously we're in real estate. Space is a. It is a business that is funded on debt, and interest rates are a key component of that. We have interest rates today, I think, let's call it 6.2. Realtor.com put out an article thinking they're going to average 6.3 in 2026. What. What say you, Jason? Do you think we get a little more goodness on spreads? You think rates go sub 6? What do you think next year?

Yeah, I'm. I'm more optimistic. I think we're going to see lower rates than that. I don't know why they would say we're going to be about the same all year. Powell's getting replaced. There's been tons of pressure on him for a very long time to lower rates, and he has capitulated a little bit. But here's the thing. Before we talk about rates specifically, Michael, I want to talk about money supply and quantitative easing. So the Fed just switched gears literally four days ago and went into QE mode. Okay, quantitative easing. So they are now, they were, during the COVID era, the biggest investor on planet Earth, and they are now an investor again, buying up more assets. And what does that mean? Remember, when it comes to mortgages and housing affordability. It's not just about interest rates. Interest rates are certainly one component and they're the component most people people see. But I would encourage everybody to go look up mcai, okay? That is the Mortgage Credit Availability Index that is published by the mba, the Mortgage Bankers Association. Okay. The mba. This is about the availability of credit. Now, the Fed's buying spree in their QE efforts is even if we don't see lower rates, which I think we will see lower rates, but even if we don't, they are buying up more assets, which pumps more money into the markets and into the economy. So it's not just about interest rates, but I do think we're going to see rates about lower than realtor.com predicts. I think we're going to hover around six. Next.

Okay. I like it. Yeah. When you think about rates, the big question I have, and you're right, they stopped Q T on December 1st. They started QE right now I think it's like 30 or 40 billion dollars main on the front end out to three years. My big question is, to your earlier point, Powell goes bye bye. He gets replaced in May and Trump's.

Going to replace him with an easy money guy. Much easier money than Powell.

Yeah, no, no question. But the question I'm asking myself is, will it be so much easy money that the Fed starts buying mortgage backed securities again? Will they buy mbs? And if they do that, rates are going way lower.

Oh my God. If that happens. The party is in full swing. If that happens. Okay. And I don't know that's going to happen, but throw my screen up there if you would. Michael. You know this is one chart you saw me post on Instagram and you really liked it. So I wanted to just share it again. Remember we took a baseline of 7%. This was about a year and a half ago. We did this study and based on that, 55 million Americans can afford the median price home, 6.5. We're already below that. 2.8 million additional qualified buyers. We get to 6%. 5.4 million additional qualified buyers.

Wow.

Michael, as you well know, we only have about 800000 homes on the market in the country. So if a third of any of these people enter the market, what do you think's going to happen, folks? Upward pressure on prices, multiple offers, good properties selling like hotcakes.

So yeah, and again, the big question I do have for 2026 is, is the Fed gonna buy MBS? Because that, that's a game changer. I don't know that they will. I'm just, I'm just scratching my head going, is that on the horizon?

I don't know. You know, it's. The Fed is a very secretive organization, as we both know. But even if, if they don't, we're still moving into a better position than we've been in for the last few years. So that's no question.

Like it? Like it. Well, let's get to, let's get to recession calls. Let's talk GDP. Specifically. I think GDP is estimated by many to be at 2 to 2 and a half percent for 2026. Does that kind of feel like a good number, or are you in the camp that maybe we, we, we touch 3% faster?

Yeah, you know, I'm in the camp of growing faster. And I gotta tell you, you know, lest I'll get trolled for being too optimistic again, but look at all of this technology and all of these innovations and how they just grow the pie. I mean, the economy is cooking pretty well through all of this crap that we've been going through. Like, I mean, it has been so resilient. So I'm pretty bullish. You know, Anthony Pompliano, if any of you follow his stuff, I get his newsletter. I don't know if you checked it this morning, Michael.

I did not see it this morning.

No, he was talking about Trump, Talking about literally a 700 increase in GDP, which is probably fantasy land.

Okay, come on, come on.

It's crazy. But, but 7X.

Wow.

7X. Okay. But he makes the case for it because, you know, compared to what? Like what other country is going to have big growth? This is all in the hands of the us. The Eurozone is trash. I mean, it's a. Europe is a disaster. I mean, it's so sad. I was born in Europe. I love Europe. It's so sad to see Europe just becoming ruined. It's just ruined, you know, I mean, Asia, yes, there's some, there are some optimistic points, but overall the US is and is going to be, continue to be for I think, a very long time, the leader of the world.

I like it. So you're thinking GDP, certainly. No. If we get 3% GDP, there's no recession. Yeah, I like it. All right, well, I've called correctly so that we did have a housing crash. It was just in transactions and all the idiots were talking price.

Right.

I think we bought them this year. I think August, I think you think September, you know, splitting hairs about the same. Yeah, let's. Let's say that we did 4 million in existing home sales in 2025.

Yep.

Where, you know, where do you see that going in 2026? You shouldn't think. I think that goes up 5%, 10%. What do you think?

Okay, so this slide shows you months of existing home supply. Okay. And you can see that, you know, everybody that wants to Compare this with 2008 is a total idiot. Okay. This is the kind of supply we had like a year of supply basically back then. Now we have 4.4 months of supply. We are in the lower band of normal in terms of home supply. Okay. And just remember, you can't have much increase in volume unless you get a good increase in inventory. Now, I do think we will see higher home sales next year, as you probably think. If I had to just stick a number on it, and I haven't studied this a lot, so don't hold me to it. But you know, I. I would say, you know, maybe we see another 300, 000 additional homes transacted next year.

Yeah, I'm calling 7%. That's right around 300. I think it's 280, 300,000. That makes sense to me. And then let's do the big one. We always got it. We got. We're going to close on price. Are you in the camp with doomers that we're gonna have a 50 housing crash in 2026? Is that where you are?

Oh, my gosh. These doomers are out of their mind. They're just out of their mind. So, no, I think we're going to see prices appreciate next year. And you know, if I had to say, I think it'll be a little better than it's been the last couple of years. Maybe I'll throw in it 3 or 4% appreciation. So far as it stands, as of the last survey I read, we're up about 2.2% year over year. So I think next year will be better than that. I mean, why wouldn't it be better? Lower rates, easier money supply, quantitative easing, scarce inventory. I mean, what is going to make it a lot worse? Unless there's some big economic catastrophe that, you know, we're not talking about.

But yeah, yeah. And then the kind of last thing to kind of wrap this all together is, is. Is the consumer.

Right?

One of the, one of the things that, you know, when I was getting my econ degree and later went back and got an mba, I studied the consumer. So I've been thinking about the consumer for 30 plus years. And you Know this K shaped economy, right. We're being carried by 10%. Do we think that the bottom end of the K kind of. Do they feel better next year? We obviously got the largest tax refunds coming.

Right.

We're looking at an extra thousand to two thousand bucks for households because of no tax on tips and other things.

Right. And maybe a tariff refund, right?

Maybe. Yeah, maybe.

Yeah.

More, more stimmy checks coming in the mail. We know what people do with stimmy checks.

Yep.

But yeah. What do you think about the consumer? Are they just, they tapped out or you know, they're going to get a second win? What do you think?

Every year, Michael? And right around this time of year we hear about how the consumer is tapped out. Yeah. The consumer can't do anymore. They're, they're having to finance everything. And then we see that holiday sales keep beating expectations and beating the prior year. Right. So you know, the doomers, they're always, they've always got their story but somehow people seem to figure it out. The economy just keeps on chugging along.

Six ways to get out of this mess.

Well, this is from the government perspective, okay. And this really is part of a longer thing that we should do a whole show on sometime. Maybe. But basically, you know, look at the government is in massive debt. Okay. We've got these big spenders we want to, you know, we all know about the debt clock, okay. And all of this massive debt the government has and there's really no way out of it except inflation. That's the thesis here. So you know, the government could default on its promises. Austerity measures, very politically unpopular. Nobody gets reelected when they do that. Politicians aren't going to do that. Raise taxes, mathematically impossible. There's just not enough taxes to raise to solve the problem. We could sell off assets. The country certainly has a lot of assets it could sell. Years ago, you might all remember, we were talking about selling the ports to Dubai. That didn't happen. But you know, there's this talk and, and we do sell off some assets. The Bureau of Land Management sells assets to, you know, land to developers. And Trump is really behind that idea. But you know, there's that not going to solve the problem. But you know, it could help. We could steal money. We could use our military to steal assets of other countries. That's really the history of the world right there. Okay. It's evil, it's awful, but it is what drew the map of the world. Okay? Technological innovation. This is the good news. This is the positive thing. You know, we talked about that earlier just a few minutes ago. I think that's. There's a lot of reason to be very bullish there. But the most likely plan is the one they've been engaging in for a very long time, and it makes sense. And that is to simply inflate our way out of the mess. Meaning that the government's promises and its debts can be paid back in cheaper dollars as we devalue the currency and debase the currency. Think about it. If the U.S. owes $1 trillion to China and 10% inflation occurs, that might occur in one year under Biden or three years under Trump. Okay. Right. But it happens. 10% happens over whatever time period. That means the U.S. got a 100 billion dollar discount.

Yep.

On the debt it owes to China. Now, why are we talking about this? And you know, Michael, where I'm going, Inflation induced debt destruction. The hidden wealth creator for real estate investors. You know, this is the thing that happens on all those mortgages that you owe behind the scenes. You keep paying them back in cheaper dollars and that keeps making you richer. So it's an incredible thing.

I love it. Again, I have always said inflation's a feature, not a bug. Invest like it. Inflation, debt destruction is the way to go. Thank you, buddy. Appreciate you.

All right, happy investing. Michael. Thank you so much for listening. Please be sure to subscribe so that you don't miss any episodes. Be sure to check out the show's specific website and our general website, hartmanmedia.com for program 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.