Breaking: Market Collapse Rocks Office and Industrial Spaces!

Thank you so much for joining me today. And let's first dive into a bunch of miscellaneous things I need to talk to you about today, not the least of which is the commercial real estate market. Further signs of distress continue and continue. So you probably know that some of the big financing entities for office space and large commercial products are life insurance companies. They collect your premiums, they have a long time horizon, they've got their actuarials that figure out when they're going to need to pay out policies and so forth. And they take that money and they invest a lot of times into large commercial projects, large office buildings, large apartment complexes, industrial properties, whatever. Commercial properties. Right. Big scale things. And we are seeing these insurance companies shy away from the office market. This article is from the Wall Street Journal talks about how many insur insurance firms have become skittish about rising vacancy rates and falling rents in the office market. The retreat from lending by insurance companies is bad news for building owners at a time when other lending sources have all but dried up. Okay. Banks, the largest commercial property lenders, have been pulling back since last summer. Well, I would argue that's a. Compared to what Statement? Because they were pulling back even before that, but more so since last summer. Okay, fine. So as I've been telling you for a good 19 years now, housing is the best investment in the real estate game and real estate is the best investment going. Right. Income. Property is the most historically proven asset class in the entire world. And housing is the one thing that at least so far has not been outsourced and probably can never be outsourced. Everybody needs a roof over their head. Everybody needs a place to go home to at night. But some people now need a place all the time, right, that they can work out of their house. So as the remote work trend has accelerated and accelerated, more and more people need even larger homes so they can have their office at home. Obviously with office space, they can outsource those office workers to India, to the Philippines. Those are two of the big outsourcing hubs, call centers, administrative work, legal firms having Indian firms do their discovery process, which is, is a really big task in the legal business. So a lot of this stuff, you know, you're paying some law firm or some accounting firm hundreds of dollars an hour for their associates, which is of course ridiculous, but they're hiring people many times in India and they're paying them, you know, $4 an hour, $6 an hour to do the work. They're billing you $400 an hour for what, a scam right. But it is the way it is. And hey, they oversee their work. So that. But that lessens the need for office space in the United States or in whatever primary market you're discussing. Now we see China with globalization right now this trend is reversing. And you know, that really started to a major degree under Trump and Biden, oddly enough. I know for the right wing people you love to hate Biden, of course, and the left wing people love to hate Trump. You know, before Trump, it was all George Bush's fault. What happened to George Bush. He gets no respect anymore. Now it's all Donald Trump's fault. You know, Biden has largely really been a Trumper. I mean, so many of the Trump era policies, Biden actually just continued them like it's nothing very original about the Biden presidency at all. And how could he do anything else? He's basically taking a nap. So, you know, there we go. But we've seen that trend reverse. But you know, in the past, China, the workshop of the world, and still the workshop of the world, outsource the need for industrial properties to China. You lessen the need here because a lot of that manufacturing is being done overseas, not just in China, but many other places. So you lessen office space, you lessen industrial property demand, and then you also lessen retail demand because that's been outsourced to the Internet. But the one thing at the end of the day that can't be outsourced is the home. You can't outsource the house. Right. You need that to be right there in that primary market. In the United States, for example, this Wall street journal shows 15% the percentage of insurers with commercial real estate lending business that plan to shrink their activity this year, according to a survey from Goldman Sachs Asset Management. That's more than three times as many in the same survey last year. So this is a really big pullback and you're going to see more pain in the commercial real estate market. Now let's talk about the multifamily housing market, because that's a segment of commercial real estate. And we've talked about this quite a bit and I just got this email today which I thought was interesting. These Miami properties with huge rent cuts. And you know, when you see those rent surveys, folks take it with a grain of salt because what you're mostly seeing is multifamily housing, not single family housing, which acts quite a bit differently than multifamily housing. But look at these rent decreases. These are giant cuts and discounts in Miami. A one bedroom, one bath condo that used to rent for $4,530 a month, now $2,830 a month. Here's another one for you. This is another Miami property. 3,770 per month, now down to 2,950 per month. And here's one more for you. Two bedroom, two bath. Formerly $4,370 per month, now only $2,730 per month. These are giant price reductions. You know, Miami, look, is a cyclical market. I mean, of course Florida is booming, but Miami is the one really, really cyclical part of Florida. Not a linear market, not a hybrid market. Always been cyclical. During the, during the Great Recession and so forth, we saw the same kind of craziness in Miami, but it's just an example of how multifamily is struggling with oversupply. And we're going to see this continue, but it will eventually get absorbed and it will eventually work itself out. It's just going to take some time because remember, at the end of the day, there is still a housing shortage in the United States. Okay, crypto. Talking about crypto a bit. Look, I have said forever that I would love to be wrong about this. Ever since I first learned about Bitcoin when it was $774, I said I would love nothing more than to see this decentralized currency succeed and be the thing instead of a central bank and a Federal Reserve and all the control they wield over us. But I never thought that it could really succeed in any big way because the forces against it, the two most powerful forces the human race has ever known, governments and central banks, will do their best to limit it, destroy it, hurt it, minimize it. They'll do whatever they can. And here's yet another example. The SEC is charging another crypto trading platform, Bittrex, for failing to register as a national securities exchange, a clearing agency and a broker. And you're just gonna see this continue. There are so many attacks from so many fronts on the cryptocurrency world. And again, they represent competition for the main product of any government, any country, any central bank. And that is their currency. That is always their main product. So you're going to see these continue. Don't forget. We're going to get into some inventory numbers here in a moment, but be sure to join us on Friday for our live zoom meeting with Ron Legrand. This is totally free. It's a two hour zoom meeting with the master, Ron Legrand. But we asked him to focus on one special narrow topic that he teaches, and that is how you can eliminate property management in your rental properties. How you can collect a big upfront sum of money today from your tenants by turning them into tenant option buyers, and how you can get tenants to do maintenance and basically eliminate all of those management headaches. So go to Jason hartman.com grand G R-A N D as in Ron LeGrand. Jason hartman.com grand we just thought we'd kind of shorten that and register for this free Zoom meeting on Friday. We will look forward to seeing you there. A lot of people have asked, is there going to be a replay of this? The answer is probably not. Maybe we'll have the replay available for like our pro members or something like that. But look, folks, when there is a replay, let me just tell you something. I know the way this works with human behavior. I know the way I work. When there's a replay, there's no urgency, okay? This is a live event, okay? Even though it's virtual and it's super easy to attend, just right on your computer or your phone, it is live. And we've got the master himself, Ron LeGrand, super famous real estate educator for decades and decades. He's joining us on Friday to talk about how you can eliminate property management, how you can get big upfront sums of money from your tenants today and just make your life a lot easier. So this is going to be the focus of this two hour free live Zoom meeting. Jason hartman.com grand okay, let's talk about some inventory numbers for a moment and we'll keep this short and sweet. So inventory has fallen again? Yes, inventory is getting lower. Only 405,000 homes for sale in the United States, some of the lowest inventory in history. But it was lower, of course, during the pandemic, during these really crazy times where housing was super tight. Okay? And last year at this time, 271,000 homes for sale. Now 405,000, down from 412,000 last week. Inventory still declining. If you're seeing this on video, you see the chart, it tells the whole story. If you look at, you know, any of these years, 2019, 20, 2017. What's this one? 2018, you see that inventory was about double what it is now. About double. And if you go back a few years, you see that housing inventory was literally triple what it is now. So very low inventory. People not selling their homes. Why would they? 25% of them have a mortgage at or below 3%. And 65% of them have a mortgage at or below 4% and 40% of all the homes in the country have no mortgage at all. There's just no distress in the housing market. Okay. So even though you've seen demand fall off quite a bit, especially in the cyclical markets, because prices spiraled out of control and buyers are rejecting that, Rightfully so. I agree with the buyers. But you just don't see the inventory loosening. It's still very, very tight. Now, another indicator that's interesting is the median price of homes that are under contract. So in other wor, what price are people willing to pull the trigger at? Where are they buying? Right. And as this chart shows you, if you're watching on video, I know some are audio, so I always try and explain the visual aids, but check out the YouTube channel to see these charts and grab screenshots of them. And whatever you see, the list price of homes under contract is $379,000. That is 1.6% of just a measly 1.6% below the under contract price of last year. So when you see these people talking about how the market is crashing, where, where is the market crashing? Please tell me it's simply not happening. Because you see the reality of this. Under contract homes, the homes people are actually buying only 1.6% below last year. All right, finally, buyer demand is keeping up. Very strong buyer demand in this season. You see that the number of homes doing price reductions, very, very low, that has declined sharply and it was about 40% at the beginning of the year and it's only 29.8% now. So people aren't really reducing prices in any big way. Anyway, I hope that's helpful. Be sure to join us on Friday. Go to jasonhartman.com grant for our mentoring clients. We will look forward to seeing you today. We've got a great meeting and we're launching our new software platform that you're absolutely going to love to make the mentoring process even, even more effective for you. All right, thanks again. Happy investing. See you Friday for our free Zoom meeting with ron LeGrand. Jason hartman.com gr. Sam.