420: Alarming State of Gen X's Retirement Savings, Low Inventory Housing Market, Creating Wealth Virtual Event

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So we are in a crisis and you're thinking, to which crisis do you refer? There are so many. Yes, there are. But keep it in perspective because there have always been crises. And that is why it is so important to be a student of history. Because you know, at every time, at every point in time, every generation, people always felt that doom and gloom was around the corner. There was always another thing, another thing waiting around the corner. A boogeyman that was going to just ruin the party. Right? And there are certainly many of them nowadays. So let's talk about one that we talk a little bit about on the show. But it really does deserve more attention. Why does it deserve more attention? Well, it has to do with the lost generation, my generation, Gen X. And you know, many of you are probably Gen Xers as well. The millennials get a lot of press, the baby boomers get a lot of press. But us folks in between the Gen Xers, the that little tiny generation about half the size of either of the two that I just mentioned, we don't get enough attention. We need attention. And you know what, even if you're not in our generation, it affects all of you in so many ways. What am I talking about? I am talking about the fact that we are in an alarming, alarming position. For those of you watching on video, I will share my screen to show you this article that just came out today. It says retirement outlook is, quote, alarming, unquote for Generation X. Bottom half of Generation X earners have almost nothing, nada, zilch, zero saved for retirement. Now this is a report by the National Institute on Retirement Security and it says, quote, when looking at median retirement savings levels for Gen X, the bottom half of earners have only a few thousand dollars saved for retirement or in retirement savings. Sorry, I'm literally making up words. I'm not actually reading the article. I'm finishing their sentences for them. Okay. Anyway, the idea is exactly the same. Retirement savings for Generation X is highly concentrated among the highest earners. Well, of course we have to make it about race because this is America and everything's about race or sex. Well, blacks and Hispanics. Hispanics have substantially lower savings and access to retirement plans as compared to whites. So here's the thing about this report, and I do not know the answer, but I really wonder, is this report only measuring employer sponsored retirement plans? If it is, that is a huge mistake because of course people may have their own retirement plans or they may not. So you get that that mistake leaves a lot of blind spots, but not completely because the vast majority of people do them through employers, which I think is silly. People need to do stuff on their own. How is our society so dependent and how is everything so related to your job? You know, if there's one thing I did like about the absolutely stupid Obamacare plan is that it did attempt, although it did not succeed, but it attempted to kind of divorce health insurance from your job, right? That creates all sorts of distortions in the market. And I think that was actually a good thing. That was one thing I actually did like about the attempt to fix health care. Of course it completely ruined health care, made it much worse. But that's another topic for another day. But these retirement plans, health insurance, they should not be related to your job. That just completely distorts the labor market. It causes people to hang on to jobs that maybe aren't the best jobs. Not the highest and best use of their talents or skills or for their own happiness and fulfillment, right? So these things should be separate, but they're not. We have what we have, so that's what we have. So I think that might be a blind spot in this report. But either way, regardless of that potential blind spot, this is still overall true. It is a giant problem. Gen Xers are fast approaching retirement age. Now that's another thing. You know, the way we look at age and the way different people, and I'm going to say this, the way different people choose to age.

You heard me. Yeah. Choose to age, right? Is a wide gap. Now me, okay, I'm a Gen Xer, right? And they say my generation is fast approaching retirement age. And look, folks, I could have retired many, many years ago. I don't need to work. But you know, like, why would you stop working? I mean, what exactly would be the point of that? I can understand why if you hate your job and you hate your career, you would want to stop working. But that doesn't mean stop working. It doesn't mean retire. It means switch to something that's more fulfilling to you where you feel that you're doing some good in the world and contributing to society. Right. I think work is a vitally thing for people. It is a healthy thing to want to contribute to society through your job, through your vocation. And it doesn't have to be conventional. It could be volunteerism, it could be raising your family. And I do include raising your family in the concept of work because we've talked about it many times before how in the 1950s and 1960s, that was, in my opinion, one of the big pushes toward the Wave two of the feminist movement was to to get half of the workforce working in a way that you could count, right? Get women who were moms, who were staying at home, they were working, right? But their work did not count in the gdp, it did not count in tax revenue, and of course it wasn't stimulating business for the corporatocracy. And this is a whole thing that really is a conspiracy, you know, and I hate to even use that word because everybody marginalizes it. Look, conspiracy is nothing more than two or more people planning something and not telling everybody else about it, right? That's like conspiracies are going on around us all the time, every day. Look, people are conspiring right now as we speak. Lots of conspiracies happening all the time. You don't have to be a wacko to believe in conspiracies because they're just happening, right? Okay, so what else does this report say? Let's see. Okay. As Of December of 2020, Gen X represents roughly 20% of the total US population. As a result, a large share of Gen X has virtually nothing saved for retirement. And most who are saving are not close to the savings targets that will enable them to retire with their current standard of living. Well, that's. I'm sure that is true. Right. So here are some charts and graphs on that topic. And this chart says the typical Gen X household has only $40,000 saved for retirement. Now these are people born between 1965 and 1980. So you can calculate their age no matter what year you happen to be listening to this episode. So overall, $40,000 and private or self employed fare worse than that, $17,000. That's what causes me to question how this is counted. Because if it's only in a plan, in a qualified plan, then that's not really a very accurate way to count. You need to really count their entire net worth toward retirement. Right? Because it's not like when you retire, you just think, oh, now I have my retirement plan and I'll start Taking distributions from it. No, I have my entire net worth. I mean, my net worth, for example, vastly exceeds the amount of money I have in qualified retirement plans. All right? So I don't know. I just don't know how this report is being done. And that's one thing that really concerns me. So private wage and salary, okay, these are the people that are privately employed in the private sector. 41,000. They're slightly better than the overall population. And then government workers fare really well because they have those government pensions. And that's why so many people like these government jobs, because they want to trade opportunity for security. Okay, fine. Well, you're probably not going to fare as well in life if you trade opportunity for security because security is actually sometimes the biggest risk you can take. Right? Falling for security instead of seeking opportunity. But look, that's human nature, so it is what it is. They have $50,300 saved, okay? That's the median savings for them. Now, let's break this up, of course, because we have to, we have to break it up by male and female. And then let's look at married and single and divorced, right? How that plays out, because you are definitely going to be better off if you're married. Now, just on its face, marriage is a good deal. Why? Because you will tend to spend less money when you're married because you're sharing things. You don't have two households, you don't have double expenditures. You share a lot of things. You share the house, you share the sofa, you share the refrigerator, you share the washer and dryer, Right? You know, you don't need to buy two sets of everything if you're married. So marriage is a good deal so long as you stay married. Because if you get divorced, especially, and I'm just going to say it, especially if you're male, you are getting taken to the cleaners most of the time now, many times. And I have many friends, professional women who are actually paying alimony to their ex husbands. Right? But most of the time, still, the worst part of divorce is for the male. That's just the way it is. Why is that? Well, in part because males will tend to do these dangerous, crappy, high paying, lonely jobs that pay better. I mean, all in all, if you work for the government, for example, you're probably going to get paid more money to go and collect trash than you are to work in an administrative office. And you're going to get paid more to do construction work than the equivalent of job for the same type of company working in an air conditioned office with a cappuccino machine. Right? So most of these dangerous, lonely, dirty jobs are done by males. Okay? And that's why they tend to earn more money. They also tend to work more hours and they don't leave the workforce to raise a family. Right. They just keep on working. So whatever, that's the way it is. Of course. Controversial topic. I don't know why it should be controversial. It's math and statistics. Not controversial. But whatever. It is what it is. Okay, so here's the median retirement balance. Private retirement balances for men, $13,000. Women only, $6,000, much worse. Okay? Married men, $25,100. Married women, $15,300. Now you got to ask yourself, how could that be? Well, if it's an employer sponsored plan, they keep these plans separate because they have separate jobs and the women leave the workforce for maybe 11 years to raise children. Right. Well, of course they're going to contribute less to the plan, right? Divorced men, $216. Oh my gosh, that is an epic disaster. Divorced women, though, fare quite a bit better. They have fourteen eighty dollars. But overall, don't get divorced. Stay married, because divorce is the destroyer of wealth. Now what does the corporatocracy and the government and the powers that be, what do they want you to do? They want you to get divorced. They're cheering for divorce. Just watch any program, watch any movie, watch any TV show and it glorifies divorce. Hey, Stella got her groove back, right? You know, all. I mean, it's like every movie, every movie, every TV show just glorifies divorce. Yeah, yeah, it's. It's the way it is. Okay, let's check out a very short clip. I just wanted to share with you on the housing market because again, so deceiving and so many people just don't understand. Okay, listen to this one. Mortgage rates hit the highest point in eight months. Still, data shows that the middle Tennessee.

Housing market is hot.

News 2's Mark Kelly asked an economist how that's possible.

Buy a typical home today and your mortgage payment is about $280 more than if you bought that same home one year ago. Why? Interest rates. Still, that is not scaring buyers greater. Nashville Realtors says it is still a seller's market with only three and a half months of inventory. To flip to a buyer's market takes six months.

All of Tennessee is a very popular place to move.

Deputy chief economist Jessica Lautz is VP of research with the national association of Realtors. She says that in Places like Middle Tennessee, we are still seeing multiple offers and buyers paying over asking. And there are two big reasons why. One, not enough homes.

We've been under building for a long period of time. We're starting to ramp up building. We're starting to see that come in. But unfortunately, it does take a minute for a home to be built and for that home to be ready for a buyer to move in.

The second reason for the hot home market, millennials.

The largest generation of adults today are millennials, and they're trying to find their first home. Both of these factors are happening at the same time.

This week, new numbers show inflation cooling off. Lautz says if that trend continues and interest rates start trending down, homebuyers could hit the market in droves and prices could shoot up higher.

That means that it's going to be even more pressure on a limited inventory housing market.

Mark Kelly, News 2.

So isn't that interesting? And by the way, I love how she's such a millennial. She says it takes a minute to build a house. That's such a millennial expression. Yeah, that's pretty interesting. Now, the reporter did say something that wasn't. I mean, it's kind of accurate. But I just want to point it out. He said they have three and a half months of inventory, which means it's a seller's market. And it takes six months of inventory to flip to a buyer's market. That's not a flip, actually. That's just a stable market. A normal market is 6 months of inventory. All right, and let's just go over that again. If you take a snapshot in time and you say, okay, here are the number of homes for sale and here's how quickly they are being absorbed by buyers, it would take six months. Well, currently in their example, it would take three and a half months to absorb all of that inventory. And if demand did not increase or decrease, and supply did not increase or decrease, that's exactly how long it would take to absorb the existing inventory. Remember the metaphor that I've shared with you of the sink? The sink is the key to understanding the way the real estate market works. The faucet, new listings or new inventory coming into the market. That's the faucet, the basin of the sink, how much water is in it? That's the existing inventory and the drain. That's the demand. That's how many buyers are buying the existing inventory. Or in other words, how fast is that inventory being absorbed. So where are we now? Well, we have a trickle of Water coming out of the faucet. Not much new inventory coming on the market at all. We have about 35 to 40% of the basin of the sink is full with water. So again, most of the sink is empty. And what I'm making the assumption of, and I'm, I'm not even sure this is exactly the right way to make this assumption, but it's the way I'm doing it, is that when the sink is full, that's a normal market. That would be the balanced market. Six months of inventory. So the sink is about 35, 40% full, you know, and again, the report you saw was just Middle Tennessee. And by the way, we do quite a bit of business in Tennessee. If you'd like to look at Tennessee properties, go to Jason hartman.com or you want to look at our Florida markets, Alabama markets. Alabama is really kind of the hot thing at the moment. Florida still, of course, is very, very much in demand, but it has become a little bit more expensive. Tennessee, the perpetual linear cash flow markets that we have in Tennessee, we also have markets in illinois, Indiana. So ch all those out. Jason hartman.com in the properties section. Anyway, so that's where the sink is, the basin of the sink. That's how much inventory we have. Now. The drain was wide open. The drain was just everything that would come in through the faucet wouldn't stay in the basin. It was just draining out super fast. The buyers were buying everything. Absorption, high rate of absorption. But when the interest rates went up last year, we saw the drain start to get clogged. And that drain right now is clogged by about 30 to 35%. That's how much clogging is going on in the drain. We need some Drano. And the Drano for the real estate market is lower interest rates. That's the draino. That'll cause the drain to open wide up and all the buyers will be able to afford more houses. So that's exactly where we are. That's a good way to understand the market. That metaphor of the sink water's trickling in, not many new properties for sale. The basin is not filling up. You would normally expect with these massive interest rate hikes that we've had, you'd expect the basin to just be filling up and overflowing. But the complete opposite has happened. Because even though the drain is a little bit clogged, there's just so little coming onto the market. And that's because, of course, there's the lock in effect with the low mortgage rates that we've got all these homeowners sitting there with either no mortgage or, or super low rates, and there's just no motivation for them to sell their properties. Now rates go down again, that drain is going to open up and the inventory is still going to be trickling because there's no big way for new inventory to come into the market, at least not yet. Right. So then we're going to see prices skyrocket again. Again, probably not as much as before. It'll depend how low rates go. Right. But when that pivot occurs, it will light the market back on fire because the drain will open up and the inventory, more inventory will be absorbed. But the inventory is still very, very low. So we'll look at that in just a moment. All right, We've got our virtual event coming up this weekend. Okay. It's just a few days away. We start Friday evening and we go Saturday for a few hours. This is a virtual event. It's the first time ever I have done my core teaching seminar that I've been doing for 18 years. The first time I've ever done this event virtually. If you've been to our other virtual events, you just jump on Zoom. They're super easy to attend. You have never seen this one. Virtually thousands and thousands, actually tens of thousands of you have seen it live. But we haven't done it live even in a couple of years. So this event is long overdue. And our investment counseling team asked me to do it as a virtual event. So we are doing it in just a couple of days. Go and register. Join us for that. Jason hartman.com and I know many of you have the question of, hey, I'm only going to be able to attend part of it live. I'm going to attend some of it, but not all of it live. So you do have the opportunity to get the recordings when you register. That's an option for you at checkout, so just check that out. Jason hartman.com right at the top of the page, click on the Creating wealth virtual event and get your tickets and join us for that. These are pretty small group events, so you'll have a good opportunity to get questions answered, interactions. At the beginning, we'll probably go around, have quick introductions so everybody kind of knows who's on Zoom with them. These are just really great events because they're intimate and people love them. So come join us. Creating Wealth Virtual and live just a few days away. Jason hartman.com all right, let's take a look at inventory. So inventory dipped just a Little from last week. 464,000 homes for sale in the United States of America. Again, normal, meaning the sink would be full, but not overflowing, just normal. Overflowing would be a buyer's market. Sink not full is a seller's market. That's where we are. So Here we have 464,000 homes for sale, and that means we are far, far away from normal. Full sync of about 1.2 million homes for sale at any given time. Altos, our friends there. Mike is projecting that we will end the year with even lower inventory. So more water will drain out of the sink, and the sink basin will have less water in it, fewer listings, less inventory by the end of the year. And he's predicting a 15% reduction in housing inventory. So again, a tight, tight market. Many people are surprised. Many people are surprised. But the other thing to think about is not just the real estate side of the equation, because every tenant you have, every would be home buyer out there is also squeezed by many other factors. Generalized inflation in the economy. And here's another example of it. Of course, you've got to consider the source. Zero Hedge, Tyler Durden, the character from Fight Club, which, by the way, is an excellent movie. I mean, you know, I remember when I first saw that movie. I was in Chicago and I was waiting for this gal I was dating to fly into Chicago. She was meeting me there, her flight had a delay, and I was walking down Michigan Avenue, and I'm like, well, what do I do for the next few hours while I'm waiting for her? And so I decided to peek in to a movie. And the only movie starting at the time where, you know, I could go in and see a movie right away, just kind of solo walking around. I was kind of bored was Fight Club. I didn't want to see this movie. I saw the previews. I thought, this looks barbaric, these guys beating each other up. Why would I want to see that? Oh, I'm glad I did because there are so many interesting lessons in that movie, even though it is a little gory and you should see it. You know, the guy that wrote the book that the movie was based on sold the rights for only $10,000. And that movie is like a. You know, it's a classic. I mean, there are so many interesting lessons, but one of them is about debt. That's the whole premise of the movie, is that they want to wipe out the debt, right? That all these big corporations are holding against people to make them debt slaves. Well, you know, I Like debt, when it's mortgage debt, inflation induced debt destruction. But anyway, so Zero hedge is kind of the very pessimistic sky is falling end of the world doom and gloom fear porn website. But they do have some good articles and some really interesting studies. And this article I do want to share with you from Tyler Durden, not really his name. On the inflation front, right? Auto insurers hit by worst crisis in 30 years sends auto insurance premiums skyrocketing. On the inflation front, consumers have a reason to celebrate as prices for used cars saw a significant drop. Of course during the pandemic we saw used car prices skyrocket. However, there's a flip side to this. As auto insurance rates soar, driven mainly by higher repair costs, larger medical bills and soaring litigation fees. The Wall Street Journal found all state has jacked up car insurance rate premiums by 40% in Georgia. Nationwide, mutual insurance has increased rates by 32% in California and State Farm has bumped up rates in New York by 11%. The reason is that many of these insurance have experienced significant losses over the last several years and indication premiums will continue to rise well into next year. So your potential renter, your current renter, your potential buyer, if you're selling any properties, is getting squeezed all around. And you, if you know, you may have noticed your homeowner's insurance premiums, your landlord insurance premiums have increased. Look folks, we have generalized inflation everywhere. The nice thing about it is that your rental properties, just like a corporation, just like a business, you know exactly how it works. It is a pass through entity. And all of the clickbait titles out there, all of the Clickbait People on YouTube will say, oh my gosh, the real estate market is a disaster. Because you know insurance premiums are increasing, right, for tenants and for landlords. And people won't be able to afford to own the properties anymore. Folks, it is a pass through entity. I mean, you know this, you just know this. When wages go up, when they raise the minimum wage, what do all of the businesses that have minimum wage workers instantly do? They raise their prices and they pass it through to their customers. And when your costs go up as a landlord, you will simply raise your rent and pass it through to the tenants. And then the tenants will try to pass it through to their employers. If they have a job, they'll say, hey employer, I need a raise. And then we just have the spiral of inflation. That's exactly how it always works. It has never worked differently than that except in totalitarian regimes where they Distort the market and they don't let these natural things happen. The pass through entity is the rule of capitalism. It's frankly the invisible hand. Just think about it. Then you ask, well, the people won't be able to afford to rent the house. Okay, you may be right. The current person won't be able to afford to rent the house. So a new renter moving down the socioeconomic ladder will be the renter for that house. And the old renter that could no longer afford it will have to move into a cheaper house. I have seen this so many times with my own tenants over the years. I will see a tenant in one of my properties, for example, live there for a few years and then inflation is, you know, is eating away and their income doesn't keep up with inflation. And I'm doing the thing that landlords do, you know, I'm, I'm doing cost of living increases in the rent, right? They can no longer afford the house. The market has left them behind. This is a sad state of affairs. And you can blame the Federal Reserve and the government because they are the major cause of this price inflation, that cost of living inflation. And so they will simply move to a lesser house. Unfortunately, it's just the way our corrupt system works. But look, it's not just us, it's every country on earth. It's basically the same system. So that's the way it goes. And so many people get stuck in this total linear thinking that it's the same renter, it's not the same renter, it's not the same buyer. It's a different person with a different set of economics, that is the new person for this house. Just remember something about the homeownership rate. Every 1% decline in homeownership rate equals about 1 million new tenants. So as, as a real estate investor, we make money, we make our, our investment returns either through capital gains appreciation or, or increasing rents, right? That's the way it is. It's either our yield, our income, or our capital gains, or hopefully a mix of the two things. Every 1% decline in the homeownership rate as housing becomes more and more unaffordable equals about 1 million new renters on the market. What are they going to do? They've got to live somewhere. One million new renters for every 1% decline in the homeownership rate. Homeownership rate increases. That equals capital gains for you as the real estate investor. So either way you win. We're going to talk about these and a lot more topics starting Friday evening at our virtual event. Go to jasonhartman.com, join us for Creating Wealth Live and Virtual. It's going to be a fantastic event. We go for about two hours on Friday night, then we go for about five hours on Saturday. Again, recordings will be made available to those who attend the event or even part of the event, so check that out. Jason hartman.com and until Wednesday, happy investing to all of you.

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