Analyzing Trends In The U.S. Real Estate Market With Jed Kolko Chief Economist

Jason Hartman plays a Flashback Friday episode where he talks with Jed Kolko, chief economist of Trulia. The conversation goes into current buying, selling, and new construction in real estate markets around the country. Jed shares that they see the most significant increase in construction in the multifamily sector. He discusses some red flags in the housing market and claims that potential homebuyers are looking in the western part of the country and the suburbs. They end the discussion by looking at seasonal patterns of buying and selling.

Investor 0:00
My name is Andrew and I live in the Pacific Northwest. And I had always thought that investing in real estate would be a good idea and had always kind of thought about investing somewhere near my home, and luckily had enough wisdom at a time when I learned about Jason Hartman and his podcast, that I was able to apply that wisdom and change my mindset from local investing to national investing. And also to just find markets that made a lot more sense than where I live. I’m not an expert in the field in any way, shape, or form. I’m not an expert in in investing at all, but his group of counselors has great expertise and good advice and has helped me along the way as a beginner with not a whole lot of money to work with from the start. And so far, I’ve got those six properties and about three and a half years, and I’m pretty happy about it. And it’s all because his team of experts and just his knowledge and his time that he spent doing it, he can really guide you through it and his podcast is excellent. And I highly recommend it for anybody whether you’re a beginner or an expert. There’s a ton to learn there and it’ll help you get to the next level.

Jed Kolko 0:59
Welcome to this week’s edition of flashback Friday, your opportunity to get some good review by listening to episodes from the past that Jason has hand picked to help you today in the present, and propel you into the future. Enjoy.

Jed Kolko 1:15
Welcome to creating wealth with Jason Hartman. During this program, Jason is going to tell you some really exciting things that you probably haven’t thought of before and a new slant on investing fresh new approaches to America’s best investment that will enable you to create more wealth and happiness than you ever thought possible. Jason is a genuine self made multi millionaire who not only talks the talk, but walks the walk. He’s been a successful investor for 20 years and currently owns properties in 11 states and 17 cities. This program will help you follow in Jason’s footsteps on the road to financial freedom, you really can do it. And now here’s your host, Jason Hartman with the complete solution for real estate investors.

Jason Hartman 2:06
Welcome to the creating wealth show. This is your host, Jason Hartman. This is episode number 316. Wow, those numbers keep passing by after all this time 316 episodes. Wow, we are we’re just moving fast. And we’ve got lots lots more to come. I’ve got Michael here with me today. He’s one of our investment counselors. As you know, you’ve heard him on the show before. And we are going to talk about a few important current events and a property before we get to our guest today. And that is the chief economist of Trulia. You’ve probably heard of Trulia. It’s a Zillow competitor and certainly heard of Zillow. And they do forecasting and modeling of different real estate markets around the country. And the interesting thing about them is when you have a big website, like Trulia, or Zillow, where you’ve got so much traffic at that site, or realtor.com, that’s another big one. So much traffic at the site. Not only do you talk about, or can you talk about the real estate market from an a purely like market perspective, or economics perspective, as an economist would have, or a market researcher would have. But you also add in a whole nother layer of who is searching for what, how often, for example, are they searching for properties in Houston, or Austin, or Atlanta, or, hopefully not in LA, or some of the crazy markets like that, but it just adds a whole nother dimension to the way you can really talk about the real estate market. So I think you’ll find that interview to be interesting. And that will be up here in a little bit. But first let’s talk to Michael and let’s talk about some other stuff. How are you doing, Michael?

Michael 3:45
Doing great today, Jason, how are you doing?

Jason Hartman 3:47
Good. How is life in Newport Beach, California?

Michael 3:50
Well, it’s pretty much always amazing and felt like summer week ago. And then we got actually quite a bit of rain yesterday and today. So we got a false false sign of summer coming in, got thrown back into spring.

Jason Hartman 4:02
Well, I’m really surprised you had rain in the last couple of days. That’s That’s surprising. But everybody talks about the weather. When I asked you that question. I thought you were gonna talk about the ridiculously high taxes, oppressive government, the crowds, the fact that there’s there are so few new places to go because, you know, in terms of restaurants and entertainment, because it’s so hard to open a business in the Socialist Republic of California, but none of that you’re just talking about the weather on?

Michael 4:25
Well, we all we need are the beaches in the state parks. Just ask Jerry Brown,

Jason Hartman 4:30
that stuff’s overrated. But you and Jerry Brown can have it. I’m so glad I moved out to California. I gotta tell you, it’s funny to Sarah and Ari. We’re sitting at dinner with one of our local market specialists from Atlanta Ken, who we’ve been working with for years, they do a great job for our clients and and they were sitting at it dinner right after I had moved to Arizona. And they were all talking about me behind my back but I later heard about this conversation, and they had done a in Atlanta home in Atlanta and investor buying seminar in Irvine either in Southern California, and they were all sitting around the dinner table. And so can can ask the question he says so is Jason really serious? I mean about staying out of California, you know, he moved is this is this for real? And they started taking bets on how soon I was going to come back. And they all agreed it would be like, I’ll give him six months. He’ll be back in California. Well, folks, it’s been two years. And I’m still here. I don’t have any interest in coming back to California.

Michael 5:31
Those are still and they pop up on your Facebook, everyone’s well, especially when you joked about retiring. Everybody said, Oh, so you’ll be back in California? No time?

Jason Hartman 5:39
Yeah. Oh, no, that that would definitely not be one of the better places to retire. Talk about. Talk about getting Wham with expenses and taxes and high cost of living, and no thanks. But someday, maybe I’ll eat my words. There are a few things I miss about California. But there’s a lot of things I don’t miss. So far, the scale is in the in the favor of staying away. But But anyway, hey, let’s talk about you. And a couple interesting current events and articles that were really fascinating that you posted in our one of our internal intranet groups where we all within the company, we kind of network and come up with ideas and do a lot of content creation. And you posted some interesting things there last week, where do you want to start, Michael,

Michael 6:19
let’s start with the six of the worst real estate investments. And it actually is a Zillow contribution to Forbes. So you were referencing Zillow, and then Forbes, obviously, one year, Steve Forbes, one of your past guests. So right off the bat, and he’s really, I probably would have mentioned the article to the group, except it’s everything that you’ve been saying, as long as I’ve known you. So just reinforces that there’s some other big media powerhouses that are reinforcing the same thoughts that you have on real estate.

Jason Hartman 6:48
And actually, Michael, it’s longer than you’ve known me, because you were listening to the podcast long before you actually knew me. So. Right?

Michael 6:56
Oh, I think, like six years ago, okay. I think Yeah,

Jason Hartman 7:00
cool. Good stuff. Well, yeah, no, I got it. I gotta tell you, folks, just because you hear the word real estate doesn’t mean it’s the right kind of real estate. What we’re all about is direct investment in real estate, where you own it, you control it, you do not leave yourself susceptible to violating commandment number three of investing with a crook of investing with an idiot, or investing with someone who’s taking huge management fees off the top of the deal. And all of these things, well, not all of them, really, I guess the first two could be direct ownership. And the rest of them really aren’t in the same way. So let’s talk about them. But But go over the six. I mean, these are great. This is really a great article. There’s some great lessons here, folks. And you know what I liken it to though, Michael, before you go over the six items, is these promoters that it’s like a total misnomer. It’s a non sequitur. It’s an oxymoron. It’s just pure stupidity, where they talk about you hear all these commercials, and I’ve talked about it before. Oh, own physical gold inside your IRA. Folks, you can’t own physical gold inside your IRA, in the true sense of the word, okay? You’re owning paper, gold. It’s not physical gold, because you don’t take possession of it. Physical to me means you take possession, which is the only way ever to invest in those metals. All right, this sounds like the same kind of misnomer about real estate, but but go ahead.

Michael 8:23
Okay, so number one, anything that doesn’t generate rental income? And you just want me to rip through these real fast?

Jason Hartman 8:28
Yeah, yeah, I mean, anything that doesn’t generate rental income. So like I say, and I and I put that in bold in the creating wealth, home study course. And in the creating wealth, live seminars that full day boot camp, understand that anything that does not generate income or rent is not an investment, it does not qualify as an investment. It is only a speculation. It’s gambling. And this is the reason we don’t recommend vacant land. vacant land is not investing. vacant land is speculating. You’re buying purely for capital appreciation potential. No income.

Michael 9:05
Yep. Next one. Number two, anything with negative cash flows.

Jason Hartman 9:08
Okay. Now that one I really want to just address for a moment and here’s why. Look at I agree with that. Conceptually. However, there are times where the financing opportunities are so good that you could put nothing down or 5% down on a property. And if you put a reasonable downpayment, which in my eyes is about 20% is a reasonable downpayment. If you put a reasonable downpayment, then you would have positive cash flow. But if you put down less than a reasonable downpayment, what you’re really doing in essence is you’re financing your down payment. So I would rather pay my down payment as I go, if I could, you can’t do it anymore, because nowadays, you pretty much have to put down 20 25% on Pretty much everything. There are occasionally a few exceptions, but they’re, they’re the exception rather than norm. And so in that case, I have a strategy I call deferred down payment, and you could potentially have a small amount of negative cash flow. And the investment could still be a really excellent investment, because you did not put a reasonable downpayment. Now, it’s kind of hard for people to get their head around this. And I tell you, I have presented this to thousands of people. And I have had vociferous debates, Michael, over this exact subject, because people just can’t get their head around it, they can’t get their head around the idea that when you buy a stupid mutual fund, or a stock or a bond, almost any time you do that kind of investment, you put 100% down yet on it, and maybe it produces no cash flow, it’s might be a non dividend paying stock, for example, or you know, a mutual fund that doesn’t distribute any any dividends, right. And so you have negative cash flow with 100% down or not negative, but you have no cash flow with 100%. Down in that example. So here, you only put one fifth of the amount of money down, if you’re putting 20% down. And on any property you buy from us, you’re gonna have positive cash flow, provided you get your property rented and do the job correctly, which of course we help you with. But there are times and we might come into one of those times that things get really frothy and stupid, again, in the lending market. I’m not saying that that’s right, overall, for the banking community, but I’m gonna say to our clients, Hey, take advantage of it. If you can use that deferred down payment. Sometimes it’s pretty good. Not always, it’ll be qualified, and I’ll explain it when it happens. But there was a time when that actually made a little bit of sense. But your What are your thoughts on either of those two points? You know, I don’t want to dominate the conversation.

Michael 11:52
Well, that’s funny that just that how this topic came up, because I was actually doing some spring cleaning this week, and came across one of the old pro formas from Atlanta, and it had the negative cash flow. And, you know, when I first was flipping through the paper was it

Jason Hartman 12:06
was 5%, down, right?

Michael 12:07
Then I saw Yeah, 95% financing. And then I actually had a note, it was before I worked with you and it said finance your down payment, and then suddenly it started making sense. At first I was like, Wait a second, Jason, you know, a platinum properties property with negative cash flow. But it only took two seconds to remind myself that you said you know take advantage, tiny downpayment, your finance your downpayment, and this is actually can be a phenomenal investment down the road.

Jason Hartman 12:32
Yeah, the example I used to give is that the time horizon for the break even point was about nine years. So let me just give you an example here, you know, and I’m doing this math off the top of my head, I really shouldn’t do it this way, I should pull out the old PowerPoint presentation where I present this concept, and show people how it works. But if you take and you put $15,000 less money down on a property, just as an example, okay, $15,000. But instead of having $100 a month positive cash flow, you have $100 a month, I don’t want to call it negative cash flow, because that’s not really what it is. It’s deferred downpayment, there is a difference. And a distinction. It’s kind of like that other concept that some people can’t get their head around of the concept of appreciation, Michael versus regression to replacement cost, I say those two things are different. They look the same to most people. But they they really are different concepts, regression to replacement cost, versus appreciation, different concepts. So here in this example, if your $100 a month, deferred down payment, look at what it takes that the Delta there is $200 a month, because if you put the $15,000 extra down, you would have $100 a month positive. But now, when you’re putting the $15,000 less money down, you have a $100 negative. So let’s take $15,000 and I’m going to divide it by $200. The amount of the Delta divide that is 75. Okay, now, what does that mean? That’s 75 months. Now, let’s take 75 and divide it by 12 months in a year, that in this example, it’s 6.25 years is the time horizon. So that’s an awesome deal. I mean, I would take that deal in a New York minute, I would much rather finance my down payment. But now you go to most Joe sixpack Americans, and they don’t have the discipline to keep the money in the bank, they’ll go out and spend it, they’ll be idiots, and they won’t, they won’t be able to have the financial maturity to manage the concept of the deferred downpayment, right. But anyone who’s really thinking it through and who’s going to be responsible, it’s a great deal anyway,

Michael 14:51
plus in that six years inflation you owe most likely we’re gonna go up

Jason Hartman 14:56
Yeah, you know, all that stuff, obviously. But but but you know, look We don’t know after all this is said and done, we don’t have this opportunity nowadays. So just disregard the last few minutes. Okay, let’s move on to the next one. And the next one I love because I saw one of my buddies get into, I saw a lot of my buddies get into these deals, they suck. These deals are so bad. And I was saying they were so bad at the time. And you know, we would have these promoters want to come into our meetings and promote these and it’s like, I feel so self righteous, go ahead on what

Michael 15:27
number three tenants in common also known as tick investments,

Jason Hartman 15:31
lame, lame, lame. So tenant in common deals, what these are folks is these are these are where the common tenant in common deal would be that they would go get a bunch of investors, they go around to these investment clubs, they promote these tickets or tenant in common deals. And they would say, if you put in $100,000 into the deal, and we’ll get 20 other investors to put 100,000 in, we got to $2 million. And we’ll all go out, and we’ll buy allows the office building that has a crappy cap rate. That’s the typical deal, right. And of course, the office market went to hell in a handbasket. I’m not fond of office property, I like housing, obviously, everybody knows that by now. It’s the only thing people ultimately need for sure, as housing, they don’t necessarily need an office, they don’t necessarily need a shopping center. And we don’t necessarily need a manufacturing facility, which is the subject of our next article. So we’ll get to that in a moment. But they do need a house at the end of the day, they need a house. And these 10 common deals would be you’d have a manager. And there was a big debate as to whether or not these were real estate deals, or they were securities. So there was a lot of litigation that came out of this, a lot of investors really got burned, lost a ton of money. And then there was a bunch of other litigation, not necessarily for getting burned. But the SEC wanted it to be classified as a security, like a stock investment, versus the promoters wanted to promote it as a real estate deal. And the way they were trying to call it a real estate deal is by saying, look, you actually have a fractional deed in the deal in this office building. So you’re not really pooling your money and putting into a fund and the fund is buying the building. That would be more of a security. And by the way, I’m not a lawyer, I’m not a tax advisor. I’m not an expert on this, I’m just telling you, there’s my disclaimers, okay, I’m just giving you my real estate investor guy’s perspective. And, and so you own a fractional deed. And so Michael, if you were in this deal, and I was in this deal, and the writing other people in this deal, and we all put $100,000 in, we’d all have these fractional deeds that were basically unmarketable. Nobody wants to buy these fractional deeds. I mean, granted, I’m sure a few of them resold, and the promoters would tell you, oh, yeah, you want to sell out your interest, we have an exchange that we’ve set up with fractional deeds and all this kind of stuff. And we’ll help you sell it and exit the deal. And and it turned out, those things just fell on their face. They just didn’t work.

Michael 17:57
And they required a series seven

Jason Hartman 17:58
licensed, and they did well, only if they were considered a security. But if they are considered a real estate deal, you could just have a real estate license,

Michael 18:05
okay?

Jason Hartman 18:06
Or you could or you could actually just be the owner, or an employee of the owner of the tick, then you don’t even need a real estate license. You’re just working for the seller.

Michael 18:16
Okay, so maybe it was if you were a unrelated party trying to market it to pick up a commission.

Jason Hartman 18:21
Yeah, then then you’d need a real estate license. But But what I don’t I can’t remember the way this all came down. I kind of stopped following it a few years ago, after, you know, I read about all the litigation coming out of these terrible, terrible tech deals. Okay. And I don’t know if it was ultimately classified as a security or a real estate deal. Or if some were allowed to be called real estate deals while others were secure. I just, I don’t know. I don’t Yeah,

Michael 18:43
I know, the gentleman that sold them at one of my brokerages that I worked out. He had that securities license to sell them.

Jason Hartman 18:49
No, really. Yeah, yeah.

Michael 18:51
Yeah. So and it had to do with the perspectives because of the language they put in there. So I don’t know,

Jason Hartman 18:55
folks, stay away from those deals, just be a direct investor manage, be in control. Even if those were good deals. You’re not in control. Okay, Michael, what’s number four?

Michael 19:05
Number Four development deals? Yes, development deals. Talk about speculation.

Jason Hartman 19:09
Whoa, this is hard. And I’ll tell you something. When I was at the ripe old age of 22 years old, I started taking all these classes at UCI, the University of California, Irvine, and I was taking all these classes that were for the murmur. Mr. m, I believe it was designation, or and there was another one that was like affiliated with it. I was taking both of these series of classes for the light construction management and sales certification. Anyway, I always wanted to be a developer. I thought developers those are the guys who make the big money and it was really my dream. You know, Donald Bren, the owner of the Irvine company. He’s a huge developer, billionaire, Forbes 400, etc. If you don’t know who that is, look him up Donald Bren br E and I actually got to meet him once at the Irvine company and he is one of the largest developers in the nation. And in his two, two of his kids were clients of mine, Carrie and Steve brand. And really nice guys, by the way, very amazingly down to earth and super cool. Anyway, I was wanting to be a big developer, I thought that was where the big money is. And I started taking these classes at UCI, my uncle. And I realize these developers, they got a plan three, four years out and catch the market at the right part of the cycle. And it is so risky. I just I said No way. No way. That was my deal. Now, some developers, you know, you look at big development companies and so forth. Of course, it’s different for them, because why they’re using somebody else’s money. And that’s not a bad deal. When you’re using somebody else’s money. You know, yeah,

Michael 20:44
you have the games where you have your management company that manages the deal, they can take big profits out. And then ultimately, if the development falters, and they can’t, if they go bankrupt on a deal, they, they’ve split the companies up so that they still make a huge development fee, but they don’t get the the extra big gain off the final sales of the property. But it’s structured, though, they still win at the end of the day.

Jason Hartman 21:07
You are absolutely right. They know how to structure these deals. So they segment all the companies up and one’s providing services to the other. And I gotta tell you, by the way, one of our local market specialists is doing this in Arizona. And I tell you, these guys, they are so disorganized, it’s really, I just have a very low opinion of what they’re doing. And, folks, I would not, do not invest in these be a direct investor again, going and investing in someone raising money to do their development deal. Almost never would I do that just stay away from this junk. I mean, these guys, it’s like their left hand doesn’t know where the right hand is half the time it’s ridiculous and and then they’ve got all these other companies and ones providing services to the other and they’re, you know, they’re probably taking huge profits out of one part. And that’s not the part the investors involved in like a construction company. Just stay away from it.

Michael 22:04
Just Alright, let’s get going. Right? Yeah. Number five condo hotels, intervals and timeshares. Yeah, what a joke.

Jason Hartman 22:09
People actually think a timeshare is an investment. That’s hilarious. First of all, if you’re ever if you’re ever lame enough to buy a timeshare, do not buy it retail, where the developer is selling it to you. That’s the worst deal ever even though they’ll give you a free three day weekend there and wine you and dine you so you’ll be dumb enough to invest in a timeshare. Or it’s not even invested. We Michael we should call it divesting. When you get divested of your money. It’s not investing. It’s divesting

Michael 22:39
and just what just watch the what is it the queen of Versailles. And just that’s a great documentary on what’s that company? I can’t think of that. And they were the one the biggest timeshare company in the country. And with that

Jason Hartman 22:50
Glenn IV, a

Michael  22:52
Laughlin IV it was it was

Jason Hartman 22:53
and I’m not confusing that by the way with Glengarry Glen Ross, the movie that’s different. It’s a funny movie, by the way, but yeah, no, I mean, just bad deals all around. You can the amazing thing is you can buy these timeshares on eBay, people reselling them for almost nothing like the one that the developer will charge you $20,000 for you can a lot of times go on eBay or wait a year and find them on eBay or some other timeshare brokerage website for 1000 bucks, people just want to get out of them. Because the cost of owning them is so high, you’ve got to pay all these fees, they nickel and dime you to death. It’s just a bad deal. The thing I realized is don’t buy a second home. Don’t buy a timeshare, don’t buy by vacation rental, just buy some rental properties. And when you want to go on vacation, rent a four or five star hotel, get the luxury presidential suite at whatever hotel you’re staying at. It’ll be way less expensive than owning these things. Just some things are not they’re not they’re better unopened. They’re just

Michael 23:52
Well, it’s just no common sense. They’re completely getting you on your ego and making you emotionally attached to what that giant real estate project appears to be. But you only own a tiny fraction and it’s just the numbers are terrible. At the end of the day you have high monthly fees and to the just just go vacation there and go to go to a hotel.

Jason Hartman 24:13
Yeah, just get get an awesome hotel. It’ll cost you way less money and you’ll love it much more. So number six

Michael 24:19
foreign real estate. Oh, yeah.

Jason Hartman 24:21
Yeah, be careful. The scammers are out in force on foreign real estate. I tell you, I’ve talked to a lot of these guys and I’ve been around a lot of them. And we just I in fact, last week I just had on my jetsetter show Kathleen paracord on for the second time I had her on before and she is like one of the Guru’s for decades of international real estate international living lives in a Gora company and living invest overseas and all this stuff and look at folks, if you’re going to do that kind of stuff, you got to be really careful and make sure you are working with trusted people. Because a lot of times these people don’t even get titled to the stuff they think they’re buying. If Buying in a first world country you’re probably okay. But in a lot of these promoters are selling this junk in foreign countries and it’s just, it’s just mind boggling the kind of profit margins they’re making at your expense is. It’s pretty scary.

Michael 25:13
I actually talked to one of the attendees at the from the Belize conference.

Jason Hartman 25:18
I just forgot to mention that. I was going to mention Billy’s and I forgot. Oh, wait, you were there with me?

Michael 25:22
Yeah. So he, he actually went to see one of the promoters properties in South America. And he said it was literally the middle of the Peruvian desert. And they were trying to sell it as Isn’t this great. You’re living off the grid, you’re out. And he just thought, yeah, you’re off the grid, because nobody in their right mind would run utilities to the middle of this desert. And they wanted like $250,000 for, I don’t know, it was 10 acres. And this investor, he could tell that they probably paid two and $50,000 for they’ve probably got about 100,000 acres in the desert. And now, you know, they’re trying to do probably a 10,000% markup on Well, he felt like you’d have to just be such a sucker to buy it after seeing it.

Jason Hartman 26:06
This is a sucker’s game. And look, there is one thing I like about foreign real estate. At some point, I’ll probably buy some foreign real estate myself. And I’m not saying it’s all bad. I’m just saying there’s a lot of scammers and sharks out there in that world. Same thing with the world of asset protection, just watch your back, because there’s just sharks and scammers everywhere, making a lot of false claims, in my opinion. But there is one really good thing about foreign real estate. If you’re a US citizen, you don’t. And I you know, again, don’t quote me on this, okay. It’s just what I’ve read and heard you better be careful and get some good solid advice from a real advisor. But from what I hear, you don’t have to report it to the government, the IRS, and a lot of people that want to sort of internationalize their life and have some assets offshore who are Americans, it is kind of good in that way. It allows a little more flexibility. Now the American government visa V, the IRS may just change that law next year, next month. Who knows, but the way it is now, my understanding is you can own foreign real estate and not report it. You can’t have a foreign bank account and not report it, you got to report that. But the real estate for some reason it’s treated differently, probably as a result of some expensive lobbyists who went in there and bribed a politician to get the law written the way they want it. That’s the way everything works in this country. Unfortunately, you know, if I was president, the first thing I would do is eliminate lobbyists. I tell you lobbying. I mean, I don’t know it serves its purpose. But I gotta tell you, there’s so much corruption in that world. It’s it’s mind boggling. But yeah, be careful. The foreign real estate. Nuff said. What do you say?

Michael 27:41
Yep. Let’s keep going. Okay, next topic. Okay, let’s jump real fast to that Cato Institute article. They talked about the the myth of manufacturing of manufacturing Renaissance. But you know, we had an interesting discussion about this before we jumped on today. So this article is trying to say that, although jobs in manufacturing in the United States continue to decline, when you look at a whole bunch of other metrics, such as respect to output value added revenues, return on investment, exports, imports, profits, there’s all these different metrics you can use. And actually, our manufacturing, under those metrics has been increasing the entire time, even while we see the manufacturing jobs decreasing. And they felt like the media Miss portrays what’s going on. And they act like we’ve completely lost our manufacturing base. And it’s this big crisis in the country that will never return to it. When this whole time we, from their perspective and the metrics they chose to, to reference we’ve been increasing for four decades. See, and I talked to you before about this off the air because we just chatted about this article for a few minutes, that I really am not sure I agree with this article. And the reason is, and I didn’t dig and think it through enough, but a lot of these you know, you’ve all probably heard there’s this whole famous book, it’s called and I haven’t read it, by the way, but I do own it. I bought it thinking

Jason Hartman 29:00
I would read it. I’ve got a lot of books I own but have never read

Michael 29:03
you your your old bookshelf at the office on Anton was so impressive. There was a lot of books on that

Jason Hartman 29:09
shelf. I’ve got like triple that at home here. And you know what my new thing is? A lot of my show guests, they send me their book. And it’s like, I don’t want your book. If you can’t give me a digital book, like a Kindle book. I just don’t want it because I just books are too heavy. They’re too hard to move. I want everything digital now.

Michael 29:26
Maybe the Jason there can be a Jason Hartman Foundation library in some city one day and it all be all about Investor Education.

Jason Hartman 29:33
Hey, hey, that’s a pretty good idea. That’s not a bad idea. You know, I could just donate. I should donate my books to my own foundation, take a tax write off open a library books just got his library open. I doubt he reads much. You know, you know, in seeing all those presidents together, I was kind of I saw Jimmy Carter there. He looks chubby. He does. Yeah, he doesn’t look in that picture. He looked like a different, different guy. I was kind of Price. Oh, wait, we’re talking about manufacturing. Right. Okay. So how do I was statistics? Michael, here’s the thing. And I gave you this example too. But you got to look at this on a per capita basis, adjusted for population and adjusted for inflation. Because if the manufacturing is quantified in dollar amount, of course, that’s what dollars are they are they dollars in 19 $80, or $2,013. And so you’ve got an inflation factor there that you’ve really got to consider. And then you’ve got a population factor. So if the manufacturing if we’re talking real dollars, inflation adjusted dollars, in 1980, for example, say the manufacturing output of the country was I’ll just pick a number $3 trillion. And then just as an example, say we had 200 million people in the country. And now we have about 300 and 10 million people in the country. So the population has increased. So if it if the population went up by a third, then the inflation adjusted output of manufacturing needs to go up by a third, to be at the same level. And I think, although I’m not sure, because I haven’t agonized over it, that this article is misleading in that way, I think manufacturing my impression, at least, and tell the listeners your impression, but my impression is that manufacturing, inflation, adjusted for inflation and adjusted for population or per capita has declined pretty steeply in the us your thoughts?

Michael 31:31
Well, I’ll admit, I’m really not an expert on things like GDP. And I even was trying to Google after our discussion, I tried to find a chart of manufacturing, you know, revenues over time. And I couldn’t really find it based on a per capita, right, you know, chart. So I could I could get some sort of graphic to really measure that. So I, you know, I don’t know it’s not, it’s a number that gets tossed around. And I don’t, I’m not an economist. So I don’t put a ton of, I don’t pay a ton of attention to some of these metrics as maybe I should, maybe I shouldn’t I don’t know.

Jason Hartman 32:03
Well, the thing you got to remember with everything, it’s got to be adjusted for population, it’s got to be adjusted for inflation, or just, it’s out the window. So let’s jump to the next article. And let’s talk about taxes. And this one, Michael, this was a great post and some of the videos that came with it, were pretty awesome that you made in our intranet site. But these companies are just playing this amazing game. And one of the guiltiest Believe it or not, is a favorite, it’s the most valuable company on Earth. It’s Apple Computer. And it’s it strikes me funny, Michael, because al gore is on the board of Apple, and they’re sort of, you know, Apple’s got kind of a liberal kind of spin to it. I don’t know. That’s just my impression of Apple, although I love their products. And I would assume that at the apple headquarters in Cupertino, a lot of people are driving the Prius, and they’ve got a a bumper sticker that says Obama on the car, and all this stuff. Right. And yet Apple is like an expert. I mean, at I don’t want to say tax evasion. But tax avoidance. Yeah, the legal version of it.

Michael 33:10
They I think it was in this documentary, The guy makes a funny comment. And he says, the difference between tax evasion and tax avoidance is the width of a jail cell.

Jason Hartman 33:18
Yeah, yeah. Exactly. The width. No, it’s the it’s the thickness of the wall. Yeah. The jail. Yeah, exactly. Well,

Michael 33:24
I actually, I don’t think is Apple’s still the most valuable company after their, whatever. 43% decline in value, whatever.

Jason Hartman 33:31
venture to guess that they are, because I thought they were about three times more valuable than any of the big oil companies. Yeah.

Michael 33:37
Okay. Well, so that this documentary, the tax free two, were they the Zero Hedge called it around the tax avoiding world and 53 minutes. And so they they cover how all these multinational corporations use various treaties in different countries to flow profits and keep certain funds offshore, and use all these methods of they brought up Which one was it Starbucks and how frappuccinos A trademarked name, and they can pay royalties to that trademark in like the Netherlands to send those profits offshore. So just an interesting look at what all these big companies do. They said Apple’s effective tax rate as a corporation was like 1.9%.

Jason Hartman 34:15
Unbelievable. Yeah, good. No wonder apples so profitable. That’s one of the reasons they’re very well managed.

Michael 34:22
So I think this is just interesting from a, it’s just interesting from a perspective of what are these big corporations doing? It might make some people angry. But, you know, my take away then at the, at the end of the day was, these multinational companies spend 10s of millions of dollars, maybe it’s hundreds of millions, I don’t know, in accounting fees and services to the Big Four tax firms so that they can avoid paying tax. And we can really take advantage of the most tax advantage assets just by being investors buying real estate.

Jason Hartman 34:51
Yeah, I know, with our income property investments, folks. We’ve got the most tax favored asset in America. And we talked about the foreign property investors and all of these people, like the people in believes they spend all this time like agonizing over how do I get out of America? How do I avoid taxes, and I love America. And I love Apple products too. Okay? And it’s, it’s really not complicated. Just buy yourself a bunch of income properties and figure out how to become a real estate professional. The those two goals are the most important two goals you should have in your financial life. You become real estate professional, and own a bunch of income properties, because you can get into a position where you virtually pay no tax. It is amazing. And I tell you, I’m in that position, and it’s pretty awesome. I pay relatively little tax, okay, believe me in and it costs some money to do that. It creates some complexity to do that. But I do it right here onshore in America without doing any monkeying around or breaking any laws or living in fear or not filing tax returns, you just the IRS, the government, the banking system incentivizes us to buy income property, they want you to provide rental housing to people do what they say, do what they want, they will give you money in the form of not paying taxes to do it. It’s It’s a wonderful thing. It’s really incredible.

Michael 36:18
And let’s let’s talk about one of those properties that absolutely they should be buying. Go for it.

Jason Hartman 36:23
Yeah. Where is this one? This one’s in Houston.

Michael 36:25
Right? This is Houston. And I feel like Houston, you know, it’s maybe not quite as sexy to people as Austin and Dallas. Yeah,

Jason Hartman 36:33
but it’s a great rental market. Let me tell you, I love my Houston properties. And so does Sarah, you hear her talk about it all the time. The cash flow is so good there. I mean, it’s just, it’s just

Michael 36:43
awesome. This one, I just can’t believe you know, this is brand new construction. It’s a four bedroom 1400 40 square feet, the purchase price is 129,000. And what’s our

Jason Hartman 36:54
total man look at this. So your your projected rent here, we’re looking at the performance on the website at Jason Hartman calm is 1350 per month, we’ve got the the vacancy rate in there, we’ve got the management fees in there, we’ve got the appreciation in there, we’ve got the maintenance in there at 3%. Even maintenance, that’s a little high for a brand new house. This is brand spanking new, and listen to this cash on cash returns projected at 12% annually. This is new. I mean, we get that on older homes all the time, but this is a newer one. Okay, this is brand new, actually. And then overall return on investment. Michael, what’s the projection

Michael 37:32
45%?

Jason Hartman 37:36
You know what, I think people, when they hear those kind of numbers are going to start disbelieving us and not giving these investments the credibility they deserve. So you know what, folks, let’s just assume it only goes half as well. You got 22 and a half percent annual overall return on investment pretty darn good. The cash flow here is projected at 30 over 30 $600 annually. So I mean, that’s, that’s a brand new property. It’s unbelievable. I mean, it’s just, it’s just really, really good. And of course, you do have higher property taxes, there’s no question about it. But that pretty much passes through the tenants, they pay higher rent. It’s funny. In Texas tenants think they’re getting away with murder, they don’t have state income tax. And if they don’t own a property, they don’t pay any property tax. But all that really happens in reality is the rents are higher than they would be if the property taxes were lower. And so they just pass that expense right through to the tenants. That’s all that really happens. In reality. Everything is a pass through entity. That’s the way it works. And in free markets, folks, Michael, that was a good book. I love that property really good. It’s in Houston. So check it out at Jason hartman.com. And anything else we got to get to our guests.

Michael 38:50
Now we ran really long as we like to do.

Jason Hartman 38:52
Yeah, we we tend to nobody ever accused me of being short winded today. Okay, anyway, I’m gonna shut up now. Well, actually, I’m not. Because we’re going to talk I’m going to be talking to interviewing a guest here. So we will be back with our guests in just about 60 seconds. And Michael, thanks for joining me today.

Michael 39:07
Thanks for having me.

Jed Kolko 39:10
What’s great about the shows you’ll find on Jason hartman.com is that if you want to learn how to finance your next big real estate deal, there’s a show for that. If you want to learn more about food storage, and the best way to keep those onions from smelling up everything else, there’s a show for that. If you honestly want to know more about business ethics, here’s a show for that. And if you just want to get away from it all and need to know something about world travel. There’s even a show for that. Yep, there’s a show for just about anything, only from Jason hartman.com or type in Jason Hartman in the iTunes Store.

Jason Hartman 39:57
It’s my pleasure to welcome Jed Kolko to the show. He is the Chief Economist with Trulia. And I believe he’s coming to us from the San Francisco Bay Area today. Am I correct yet?

Jed Kolko 40:06
That’s right here in San Francisco on yet another beautiful California afternoon.

Jason Hartman 40:09
Well, fantastic. It’s great to have you on the show. And of course, pretty much all of my listeners, I’m sure know what truly is. But for the three or four of them who don’t, maybe you just want to start with that, and, and then we’ll talk about the real estate market since you are the chief economist.

Jed Kolko 40:25
Great. Cooley is an online real estate marketplace, it’s the place to go to look for listings, whether you’re looking to buy or to rent. And we have fantastic local information about different places, we integrate that into our search. So you can choose to search either based on the properties of a house, like a certain number of bedrooms, you can let us make recommendations for the types of homes you might like. Or you can search based on neighborhoods, say looking at all the homes within 20 minute drive of your workplace.

Jason Hartman 40:54
Fantastic in it as far as the economic side. I mean, some might ask, why does truly a have a chief economist? Are you making predictions? Or you I mean, you’re obviously observing the market. What do you do on your side of it?

Jed Kolko 41:09
First of all, the economics work we do helps us put good information on the site, we call this giving consumers the inside scoop. So on our site, you can see what’s going on in different local housing markets. We also have information about home values, about crime rates, commute time, school quality, so information that can really help you when you’re at the point of searching for a particular home. We also have blogs, which talk about what’s going on in the housing market and what that means if you’re looking to buy rent or sell. So just recently, we published our regular buy versus rent report, where we look at the overall cost of buying versus renting. It’s a big decision. Of course, it’s the biggest financial and personal decision that many people make. We take a look at all of the costs of buying and renting and published the report and an interactive map where you can look at different scenarios to figure out depending on the tax bracket you’re in, and whether you itemize how many years he’s planning to stay at home and where you are, what city you’re in, whether it makes sense to buy or rent.

Jason Hartman 42:14
Yeah, fantastic. Now I assume that the results of the buy versus rent analysis is pretty good right now in favor of buying. I mean, we’ve got housing affordability, at the best best rate to the highest rate. It’s been ever since NAR, the National Association of Realtors started tracking it, I believe back in the 70s rates are low prices are low inventory is kind of a little getting a little scarce. But maybe speak to that for a moment.

Jed Kolko 42:39
That’s right, buying right now is almost as affordable as it’s been in many years relative to renting. Right now, when we look on average across the US buying is roughly 44% cheaper than renting. And that’s when you take into account all the costs of owning and all the cost of renting, including insurance, maintenance taxes, as well, of course, it’s a mortgage payment and the rent payment. We also take into account what’s likely to happen with home prices and rents and how that factored in. When you sell at the end of your ownership. put that all together. It’s actually cheaper to buy than to rent in all of the hundred largest markets in the US, though, it’s a closer call in some places than others.

Jason Hartman 43:21
When you do that buy versus rent analysis, Chad, what is it predicated on in terms of downpayment,

Jed Kolko 43:26
our baseline scenario is a 20% down payment, a 30 year fixed rate mortgage at today’s best rates, which is around three and a half percent. But we also look at alternative scenarios like getting a four and a half percent mortgage or even a five and a half percent mortgage because we know that unless you’ve got a great credit score, you might not be able to get a 3.5% mortgage today.

Jason Hartman 43:37
But those those mortgage rates are just unbelievable. I mean, no matter which way you slice it.

Jed Kolko 43:52
That’s right. I mean, they started to go a bit over the past few months. But you know, there’s still so low right now that even even if rates go up to five and a half percent, it’s still significantly cheaper to buy than to rent in much of the country, just because even five and a half percent is low by historical standards.

Jason Hartman 44:12
It sure is It sure is. So it’s pretty much a no brainer, if you will, that people should be buying of course the the big challenges people are having is we’ve had this very large financial crisis. And many people have bad credit scores because they’ve done short sales, loan modifications, foreclosures or strategic defaults. And that has made it difficult so some people cannot buy for a while based on that issue. And then also saving a 20% downpayment. Especially in a more expensive market. That’s a pretty big chunk of money. Given the current economy, especially

Jed Kolko 44:49
the downpayment. getting a mortgage are the two biggest hurdles right now, getting a mortgage is a hurdle, not only because of people’s credit histories, even people with reasonably good credit histories. find it hard to get a mortgage at Cuz credit still is tight, that may change over the next year. But banks are still more reluctant to lend than they have been. You know, the third factor though, in addition to saving for a down payment, and qualifying for a mortgage, is that inventory is tight in a lot of parts of the country, especially in the West, there’s not a lot to choose from. So even people who can afford to buy and qualify for a mortgage, they are fighting with lots of other buyers, and are getting outbid by investors or just aren’t moving fast enough..

Jason Hartman 45:29
You know, it’s amazing jet how quickly it it sort of turned around. I mean, just a year and a half ago, people were very unsure. And now we’re seeing prices increase. I mean, here in Phoenix, we were up 35% off the bottom, and inventory is so scarce, in in so many markets, I mean, prices going up almost everywhere, it seems like I mean, we don’t we don’t do any business in Michigan or anything like that. So you know, I don’t know what’s going on there too much. But your thoughts on which direction we’re headed in,

Jed Kolko 46:02
it does feel that the turnaround happened very quickly. But in fact, prices were falling for a very long time, they were falling only slowly over the past couple of years. And so the price turnaround wasn’t sudden, it actually was a long time in coming. What is sudden is the inventory decline, there’s been a steep drop off in inventory in much of the country. And part of that’s about the psychology of price changes. To put it simply, nobody wants to sell at the bottom and everyone wants to buy at the bottom. So soon as prices turn around. As soon as prices hit bottom, everyone realizes that prices are starting to rise. And suddenly buyers get impatient. And sellers want to wait. And that’s one of the big reasons why we why we see such an inventory crunch in many parts of the country.

Jason Hartman 46:50
And builders are moving into the market pretty quickly and pretty swiftly to meet the demand. But interestingly, and I saw this survey, and this is how statistics malign things so much at least, you know, I didn’t analyze this in any degree of depth. So please correct me if I’m wrong, but it was a survey showing that new home prices or like 20, some odd percent higher than resale prices. And why I thought some people in some markets are still able to buy below the cost of construction for resale. And the new homes just basically create inflation because the builders not going to build anything if they can’t make cost of construction plus builders profit. So it’s just interesting to sort of look at those stats. But what do you think of the new home side of the equation? I mean, what how does the future look in other words?

Jed Kolko 47:38
Construction is rebounding. But we’re still a long way from normal construction levels. Right now. We’re still more than 30% 40% below normal construction levels. So it’s it’s a long road ahead. And particularly in places where there have been there have been big price declines. Like Phoenix, even though Phoenix prices are rebounding hugely. Construction is still way below normal levels in Phoenix. And also, we’re seeing the biggest increase in construction on the multifamily side. Right now. multifamily construction accounts for about 30% of new housing units. The normal share is about 20%. So multifamily is an unusually big part of the construction rebound. And that’s adding some new rental supply actually, in big cities where there’s a lot of rental and multifamily buildings, you know, big apartment buildings.

Jason Hartman 48:28
Yeah, it certainly is. Is this a recovery? Can we call it a recovery? Or is it just a nominal recovery, it’s papered over by inflation and money printing.

Jed Kolko 48:38
It’s absolutely a recovery. We’re seeing strong job growth in a lot of the markets, where prices are improving. Importantly, vacancy rates are coming down. And that’s an important measure of whether there is excess supply relative to demand. Remember, at the height of the bubble, and during the bust, vacancy rates went way up, inventories went way up. You know, there had been a lot of overbuilding, there was a lot of building in places where there turned out to be not that much demand. We are what we’re seeing now is very different. Even market fundamentals, strong job growth, tight vacancy rates in most markets suggest that it is a real recovery. Now, there are places where a lot of the price rebound is investor driven. And that may not last including Phoenix, Las Vegas, the Inland Empire, the part of Southern California, east of La in Detroit Also, we’re seeing big price rebounds without really strong job growth. And that’s a red flag. Those are price increases that could go away and could go away very quickly. The other red flag is in places where there still are a lot of foreclosures, to come onto the market states where it takes longer for foreclosures to go to the traditional process and come onto the market are going to see more than come up for sale. We’re going to see that in Florida above all. That’s the biggest foreclosure inventory is right now as a share of the total housing stock also in Illinois. New York, New Jersey, there’s still foreclosure way to come.

Jason Hartman 50:04
I want to get to that point a little more about the inventory hangover. But why did you on that, on that? I believe it was the first red flag that you mentioned. You’re saying a lot of this this inventory shortage is being driven by investors snapping up the good deals. But why would you say that might stop, I mean, what the investors lose interest for some reason?

Jed Kolko 50:23
Investors want to buy when prices are low, once prices have risen enough, it’s no longer as good a deal. Now people who are moving to an area and buying homes for that reason, will still move and they’ll move for jobs and they’ll buy anyway. But for someone who’s looking to buy because prices are low, that’s demand that starts to go away. Once prices rise, we’re already seeing markets that have had bigger price increases are seeing a smaller share of interest from foreign home searchers. And a lot of foreign searches that we see do tend to be investors, that investor demand starts to go away when prices rise.

Jason Hartman 51:00
Yeah, right. I agree with that. And by the way, having a website like Trulia, you probably just have a wealth of analytics information on who’s searching from what part of the world or the country they’re searching, and what markets they’re searching for. I mean, do you have any of that that you can share with us? It may not be handy. I know, it’s very complex, I’m sure to wade through all that data. But when you said foreign investors, I mean, we’ve got people from all over the world that are looking to gobble up us real estate right now. Australia, New Zealand, the African continent, Europe, Asia, every everywhere, and they’re just buying it from everywhere. But any website data that you’d like to share with us?

Jed Kolko 51:41
People from abroad who are searching for homes, love Florida, they love Southern California, Canadians love Phoenix, Brazilians and Argentines love Miami. Yep, we see these patterns very clearly on our site completely. We also see even domestically, the searches where people are and where they’re looking. We see a lot of searches from Chicago and other parts of the Midwest, for homes in Phoenix. In Florida, though, we see more searchers on the west coast of Florida, you know, from the Midwest, whereas the east coast of Florida is dominated by people in and around New York looking for homes. So they’re very clear search patterns across the country. One thing that we see is people tend to look for homes in markets that are more affordable than where they are now. We also see more people looking toward more people are looking from urban to suburban areas than the other way around. So this, you know, the long, you know, the long running trend, the suburbanization of the US looks likely to continue based on where people are looking for homes.

Jason Hartman 52:42
So yeah, you’ve seen a lot of this movement to rebuild inner cities and so forth. And you’re kind of saying it’s not where the trend at least is not where the searchers are, right?

Jed Kolko 52:52
We see it in some neighborhoods, in some cities, there are definitely urban neighborhoods that are seeing strong price growth, strong population growth. But when we look at the overall trend, taking the view across cities and suburbs across the US, there is faster growth, there’s more population growth, and more search activity in suburbs and cities.

Jason Hartman 53:11
Very interesting. What else do you see? And what else should people know?

Jed Kolko 53:15
One thing that we see is that the market is so seasonal. We’re at a time right now, at the end of March at the beginning of the spring season, when housing activity really starts to pick up. But it picks up in a very particular way. We see on our site that March and April, are some of the peak months for search activity online. But it turns out that sellers often wait too long in the year to put their homes on the market inventory tends to peak later in the year in July or August. That means a lot of sellers might be better off by listing their home earlier in the year when more people are searching and a lot of buyers might be better off by waiting until the summertime, when they’ll be competing with fewer other buyers. And there’ll be a little bit more inventory. So the seasonal patterns are really important. The seasonal patterns also depend on where you are in the country.

Jason Hartman 54:03
Now Now I just want to before you make your next point, I just want to touch on on what you just said, for investors that issues a little bit more complex because then you’ve got to factor in if you can do it. You know, the reality is this is pretty hard to do. And especially when you’re looking at Nationwide investing in different markets and so forth. But then you’ve got to factor in at the same time, what is the best time to rent your property out if you’re buying an investment property, you want to be at a time when people want to rent. So there’s the combination of getting the better deal on the price or having more rental demand so that you don’t have longer vacancies. So that’s kind of a little look slightly more complicated there. But go ahead with what you’re saying. And then I want to talk a little bit more about the inventory hangover if your voice will last and by the way I want to say I appreciate you did you did say to me before we started recording that your your voice is a little bit strained. You’ve probably been working hard talking a lot. So I appreciate you sticking with us here and and I appreciate the fact that your voice is lasting, Jed.

Jed Kolko 54:59
You bet The seasonality of housing varies across the country. There’s some parts of the country where the wintertime is peak season. So Florida and Hawaii, you know, we see the most search activity in July in sorry, in January and February. You know, those are markets where there’s a lot of vacation homes. And you know, the winter months are, you know, a pleasant time to be out. And so there’s a lot of home search activity, then, in a lot of the northeast and the Midwest, as well as the West Coast, springtime is the peak, but across much of the South, it’s the summertime, that’s the peak season for search traffic. And it has a lot to do not even as much as with the temperature. But with the rain, nobody wants to go to open houses in the rain. And the summertime when a lot of a lot of the South is driest. But it’s the springtime when much of the Midwest, the Northeast, are in their dry season. And that’s when we tend to see that peak search activity for homes now

Jason Hartman 55:56
Very interesting. And how many people are searching on the Trulia website.

Jed Kolko 56:01
So we get 10s of millions of visitors each month 10s of millions of unique visitors each month. And it’s both on our website, as well as on our mobile applications, across mobile platforms, as well as on the mobile web. So people are doing heavy duty research on the website. They’re carrying their mobile devices around as they’re going to open houses. And we can see how the time of activity looks, you know, everyone’s taking out their iPads in the evening in the weekends coming to our site. So you know, there are lots of ways to get all the information about properties and neighborhoods.

Jason Hartman 56:38
Let’s talk about the inventory hangover a little bit. And then before you go, I’d like to ask what’s next for your company? And what are maybe some of the innovations coming down the road and in our business. But on the inventory hangover issue. One of the reasons there is an inventory hangover is because it just simply takes a lot longer to foreclose in some states. And those markets would be clearing and recovering faster. In my opinion, at least, if the foreclosure process was more speedy. But it just sort of drags and out, you know when it takes a long time to foreclose. And when there are all these legal problems, you don’t get to market clearing, and you don’t get to recovery as quickly. So you know, maybe your comments on that. But then also, I hear not as much anymore. But once in a while I still hear about the banks withholding inventory, that there are all of these foreclosures and or bank owned properties, or REO properties, that they just haven’t hit the market yet. So what’s your take on the inventory hangover, if it exists?

Jed Kolko 57:38
Right now this so called shadow inventory, the homes that aren’t on the market, but could be right, because they’re at a late stage of the foreclosure process or they’re already vacant, is not a big national problem. It is a localized problem in those parts of the country where it takes a long time to go through the foreclosure process three or more years, they have a backlog of homes that are still come onto the market, Florida Above all, as well as Illinois, New York and New Jersey even though New York, New Jersey didn’t have a very severe housing bust, they still have a lot of their foreclosures ahead of them. Those are the states where this shadow inventory could have an impact on prices. But in the rest of the country. Most states are most of the way through their foreclosure crisis. Most of the foreclosures that they will have had from the housing bust have already happened. And that’s true. Events are very hard hit states, like Arizona, Nevada, Michigan and California.

Jason Hartman 58:36
So your take on view, do you make predictions by the way as to what prices will be next year, when you talk about the shadow inventory and the inventory hangover issue? That’s obviously an issue of distribution. I always like to say, Jed, that there’s no such thing as a national housing market in a country as large and diverse as the United States in a little tiny country like Cyprus. That’s so much in the news lately in Europe, because of the bank problem and the government closing the banks and possibly nationalizing the pensions, but that country has a national housing market, right? Because it’s a small country of about a million people in a country this large. I mean, there are about 400 local markets. So it’s it’s a question of where that’s that’s all was the big question. I’m sure you’d agree with that. But do you make any predictions?

Jed Kolko 59:24
There are the predictions I tend to make. Look at how next year, we might be different from this year. There are a lot of people who are doing very specific forecasts on where interest rates are going to be or how many units will be built. And so I tend to rely on their forecasts for those kinds of things. But one of the things that we looked at recently in our rent versus buy report is whether it makes more sense now or a year from now. And so one, one thing I expect to see is that a year from now, buying will look less good relative to renting than it does right now prices are rising faster than rents and if anything mortgage rates are likely To go up in the next year, perhaps by more than half a point, both of those factors will make buying look less affordable relative to renting than it is today.

Jason Hartman 1:00:09
Uh huh. I agree. I agree with you. Yeah. Well, good stuff. Obviously Trulia is the website. And did you have another website or anything you want to give out or any other resources that you want to have the listeners know?

Jed Kolko 1:00:20
So on our site, if you’re looking for homes or looking for neighborhoods, going to trulia.com will get you to all that search all those search options. In addition, our trends blog, the Trulia trends page shares a lot of our insights about what’s going on and what will be happening in the housing market, both nationally and locally.

Jason Hartman 1:00:39
Fantastic. Well, Jed, thank you so much for joining us today. And I hope your voice comes back soon and you get some chance to rest it so you can recover and appreciate the insights.

Jed Kolko 1:00:48
Thanks so much for having me on the show.

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