In the opening monologue of Episode 1556 of the Creating Wealth Show, host Jason Hartman critiques the widely‑cited Case‑Shiller Composite 20 index as a poor guide for real‑estate investors. He explains that the index covers only 20 of the roughly 400 U.S. metropolitan statistical areas (MSAs) and that even an MSA is too large a unit for the hyper‑local nature of real‑estate investing, where investors need data at the zip‑code or sub‑zip level. Hartman breaks down the 20 MSAs in the index, labeling each as cyclical, hybrid, or linear, and argues that cyclical markets are essentially speculative rather than true investments because they do not generate reliable income. He defines an investment as any asset that produces cash flow, contrasting it with non‑income‑producing assets such as non‑dividend stocks, precious metals, cryptocurrency, and vacant land. Hartman then shifts to macro‑economic observations: a Wall Street Journal graphic shows $1.1 trillion in home‑loan funding over two months (April‑June), driven largely by a refinancing boom; mortgage‑backed securities are flooding the market, a situation he attributes to Federal Reserve policy. He notes that about 3.5 million mortgages (≈7 % of the market) were in forbearance as of early September, and that many borrowers are behind on payments without formal forbearance. He highlights a decline in the share of mortgaged homes underwater—from 25 % in 2010 to under 5 % now—suggesting conservative underwriting. A brief personal anecdote follows, where Hartman celebrates receiving rent 12 days early on a self‑managed property, promoting long‑distance self‑management. He concludes by teasing the upcoming interview with Mark Moss and provides contact information. Overall, the monologue blends criticism of a popular real‑estate index, a taxonomy of market types, a clear definition of income‑producing investment, and a snapshot of current mortgage market dynamics, all framed to guide listeners toward more granular, cash‑flow‑focused investment decisions.
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Welcome to today's podcast intro. Thought I'd just do it live again with you. And this is the intro for our Show Today Part 2 with Mark Moss from yesterday. And this is episode number 1556. 1556. And today, I just want to share a couple of things before we dive into the interview with Mark. And one of them is the most widely quoted real estate index. You know what I'm going to say, right? That is the Case Shiller index. You hear about it all the time. This is the one the news media seems to love to talk about. And what they're. Now, they have several indexes or indices, I guess I should say. And the one that they're mostly quoting is the composite 20 index, which is for 20 MSAs, or Metropolitan Statistical areas. And in this index, it is really interesting. And here's why. You should be very careful using this to judge the real estate market. Here's why. Even though it's, you know, it's doing well now, it doesn't tell you enough information. Remember, in a country as large and diverse as the United States, we have almost 400 MSAs, or Metropolitan Statistical Areas. This is only 20 of them. And wait till we kind of unpack this and look at what those 20 are, because you're not going to like what you hear. You're not going to like it. Or at least I don't like it. I don't know, maybe you'll like it. I don't like it. I think it's. I think it's bad news. Yeah. Sound effects. So we will dive into that a moment. But understand with. Even with almost 400 MSAs, that wouldn't be enough information to tell me where to invest. Because within those MSAs, there are over 3,100 counties. And guess what? That wouldn't give us enough information about where to invest or what the market is doing. Say you knew what the real estate market was doing for every county, over 3,100 counties in the United States. Well, a county is too big in a. In a business where all real estate is local, all real estate is local, a county is way too much to think about. A city is smaller than a county, and even a city is way too much to think about. You have to look at a smaller segment than that. So what's the next one going to be? A zip code. Well, even within a zip code, results can vary quite differently. So a zip code is too big, right? An MSA is too big. A county is too big. A city is too big. Even a zip code is too big. In a business where all real estate is local, in fact, it's hyper. Local real estate is a hyperlocal business. So why is it that the news media tells us about this index that only profiles 20 MSAs when even if it profiled every MSA, it'd be too big? But guess what? It gets worse than this. Take a look here. So of the case Shiller composite 20 index. About 75% of this index is what we call cyclical markets. Now this isn't necessarily bad. If you want to know what's going on in cyclical markets, fine and dandy. But guess what? I don't recommend cyclical markets for investors because anybody who calls themselves an investor in a cyclical market is really a speculator, a gambler. They're not investing. Why? Because remember my definition for an investment in investment is something that produces income. Period. End of discussion. That's it. Okay, we're done for today. Now that we know an investment is something that produces income. Well guess what? In a cyclical market you're not going to get income out of an investment properly leveraged, meaning 80% loan to value, for example, you're not going to get income in a cyclical market because the rent to value ratios are not good enough to support income. So a non dividend paying stock is not an investment. Precious metals, not an investment. Cryptocurrency, not an investment. Cyclical market, Expensive real estate, not an investment. Okay. And I'm sure in vacant land, not an investment. Why? None of those things produce income. But does that mean you can make money with them? Yeah, of course you can make money with them. If you're lucky and you catch it, right? And it goes up in value, you can make money with it. Sure, absolutely. Absolutely. But that is a risk, it is a gamble, it is a speculation. So fine, take a small amount of your portfolio, especially if you're wealthy, and gamble and, and invest. Okay, that's fine. But again, this is not investing, it is speculation. So when you look at these markets in the case, Shiller composite 20, looking at my screen, okay, you see Phoenix, that is a hybrid market. Los Angeles, where I grew up, that is definitely a cyclical market. San Diego, San Francisco, definitely two cyclical markets there, San Diego and San Francisco. Next we go to Denver, hybrid market. Washington D.C. cyclical market, South Florida, near where I live now. I live slightly north of South Florida, I guess. South Florida cyclical market for sure. Tampa market, hybrid market. Okay. Atlanta, hybrid. Chicago, kind of depends because if you're looking at downtown Chicago you'd have to say cyclical. But if you're looking at some of the suburban markets, you could say hybrid or even linearish. Okay, so that's kind of hard to unpack that one. Boston, cyclical. Detroit, linear. Minneapolis, St. Paul, hybrid. Charlotte was linear. Now kind of hybrid. Ish, but I'd still call it linear. Overall, Las Vegas, ay ay yai. Las Vegas is three cities in one, folks. Everybody who stereotypes Las Vegas just, you can't do it with that because Vegas is really three markets in one. It's the slummy part. It's the Strip that everyone thinks of as Las Vegas. And then it is the nice suburban areas in Henderson and Summerlin and even Lake Las Vegas. Okay, so that one, you almost give it a mulligan and don't even mention it in this example. Okay, so New York, definitely cyclical market. Okay. Cleveland, linear market. Portland, hybrid, really cyclical. Dallas was linear. Now hybrid. Seattle, definitely cyclical. All right, so this is not an index you would want to listen to when you, when you want to know about what the real estate market is doing in a country that has almost 400 MSAs. This one only looks at 20 and it's not the right 20 they'll be looking at as an investor, at least if you're a speculator, sure, look at it, that's fine, but not as an investor. And even that 400 markets, it, it, it's just to even. Those are way too big to evaluate this way. All right. In our empowered investor inner circle. I posted something that I was pretty stoked about the other day. So I just have to share it with you. And that is one of my properties is this particular property, a self managed property and I love it. I get my rent early every single month on this property and I just had to share with my, my inner circle group there that I got my rent 12 days early. So awesome. No property manager taking any money off the top. I simply got all of my money and I got it almost two weeks before it was due. So really consider self management. If you want more information on that, listen to the podcast and learn more about how you can long distance self manage properties. I've been doing it for 12 years and I think it's pretty great. Check this out. This is absolutely amazing. You know we've seen this massive amount of money flowing into the economy, right? And this number, this is from the Wall Street Journal, by the way. Wall Street Journal. 1.1 trillion. That's trillion with a T. Trillion. 1, 1.1 trillion. Dollars. This is what lenders did in home loans between April and June. This is two mere months, $1.1 trillion in fundings. According to Black Knight, refinancings were up over 200% from a year ago, and that drove most of the increase, but purchases up, too. And by the way, a lot of that purchase market didn't happen in these particular two months where the 1.1 trillion happened. That was mostly refinancing activities. Actually, I take that back. I don't know if it was mostly refinancing, but the refinancing component was hugely significant. As the entire country, it seems, I wanted to refi their house. Right. But, but what's amazing about this is that the next time we see this, for the following two months, we're going to see an amazing number, an amazing number of purchase business here. Okay, so that's largely refinance business. So amazing. And this just goes to show you how completely uneven this economic. I don't want to say recovery, because I don't know that we're in recovery yet, but this economic situation that we're in, very, very, very uneven, maybe more than any other economic situation we've been in in terms of its unevenness. And look at this. Mortgage securities. Remember, when that mortgage loan is made, it is sold off and bundled up into, into a pool. And that pool creates a security instrument, either some sort of mortgage security or a bond. Right. Well, those are both securities, but, you know, could be a different type of creative security. So I won't go into that. But just look at this. This is also Wall Street Journal. It says mortgage securities are flooding the market. And you can thank our rich uncle Jerome Powell at the Federal Reserve, our Federal Reserve chair and the Fed for this because it is absolutely insane, the kind of volume and really the kind of money being made. It's absolutely staggering what is going on in the marketplace right now. So look, in the interest of time, I don't have time to go into all these today, but I'll do that maybe on tomorrow's episode, hopefully. But one more thing before I go. And we got to get to Our Guest Part 2 with Mark Moss today. Look at this one. This is also Wall Street Journal, and this is CoreLogic data. It says people behind on their payments aren't being kicked out of their houses yet because the federal and local restrictions. Right, we know about this. We know the CDC and their new thing. Now they're being sued by the National Apartment Owners association, which was totally to be expected. And really, I don't think the CDC has the authority to be engaging in this part of the marketplace. But we'll see. We'll see what the courts say. And that one is likely to go to a pretty high court, I think. But what's really interesting here is when you look at this, some 3.5 million home loans, that's about a 7% share, were in forbearance as of September 6th. This is according to the MBA or the mortgage Bankers Association. Okay. Many more borrowers are behind on their payments, but not in an official forbearance program. And a lot of them don't even know these forbearance programs exist. They just said, hey, I can't make my mortgage payment and I'm going to stop paying. But at the same time, right here, it says it right here, folks, just as I predicted way back in February. Meanwhile, bidding wars are breaking out for suburban homes hitting the market. And what we see here on the chart is the percentage of mortgaged US Homes worth less, less than their debt on a quarterly basis. Now, what is staggering about this chart, and it is very good news for the market, is that back in 2010, 25% was the number. And look at how small that number is now. Look at how much that number has declined to less than 5%. And what does that say? Well, it says that coming out of the Great Recession, the underwriting has been pretty darn conservative on these loans. And I just interviewed the founder of Property Radar, formerly called Foreclosure Radar, Sean o'. Toole. I just finished the interview with him a few minutes ago. That'll be on the podcast on the Creating wealth show coming up on a, on an episode. Maybe next week. We'll get that one out to you. And he said, you know, back during the Great Recession, we had so many clients buying foreclosure data from us. A lot of the institutional investors, a lot of people starting funds to buy foreclosures. And starting back in March or April of this year, he said his phone was ringing off the hook with all of these vulture investors, the bottom feeders, looking for the big foreclosure crisis coming. And he said, I'm going to quote him almost exactly. And you can hear this for yourself next week when we publish the interview. He said, I don't think that foreclosure crisis is coming this time. It's just not happening. Things are completely different this time around. Very different. This is not a real estate led recession. So you can hear the details and let him unpack that thought for you on my podcast, and I think we'll get that episode out to you next week. All right, we've got to get to part two of Mark Moss. If you need us, reach out in the US 1-800-hartman. You can actually pick up the phone and call us. Our US toll free number is 1-800-hartman or jason hartman.com worldwide. And let's get to part two of the mark Moss interview right now.
