Jason Hartman looks at the fifth largest economy in the world and talks about people leaving San Francisco. He ties this into how it will affect California’s housing market. In the interview segment of the show, he hosts Leslie Appleton-Young to discuss the trends in California’s real estate market. They go into questions about malls, retail space, and hotels.
Welcome to the creating wealth show with Jason Hartman. You’re about to learn a new slant on investing some exciting techniques and fresh new approaches to the world’s most historically proven asset class that will enable you to create more wealth and freedom than you ever thought possible. Jason is a genuine self made multimillionaire who’s actually been there and done it. He’s a successful investor, lender, developer and entrepreneur who’s owned properties in 11 states had hundreds of tenants and been involved in thousands of real estate transactions. This program will help you follow in Jason’s footsteps on the road to your financial independence day. You really can do it on now. here’s your host, Jason Hartman with the complete solution for real estate investors.
Jason Hartman 0:54
Welcome to Episode 1552 1552 today, we’ve got Leslie Appleton, young back on the show talking about the economy in the market in the fifth largest economy on planet Earth. And that is the Socialist Republic of California. Now, a lot of you might be wondering, why, why do you complain about it and give it such a hard time meaning it meaning the state of California, if it’s the fifth largest economy in the world, Well, look, folks, a lot of this stuff happened a long time ago. And there are a lot of zombie cities, zombie companies, and zombie investors, zombie people, zombie household zombie families, zombie countries, okay. They’re like The Walking Dead. They’re zombies. They’re just riding on the benefit of either a reputation or an economy or something that was built A long time ago, under a different era, under a different time. And in doing this show, and all of my other shows and all of my YouTube videos, and all of the content we create, in interviewing thousands and thousands of guest experts. Let me just let you in on a little insider secret here, folks. Are you ready for a little insider secret? Yeah, here it is. Here it comes. You’re ready for this? Sometimes I interview a big name guest. And sometimes I interview them one time, and they’re on my show the first time and they’re great. I thought that’s great. We got to get them back on the show. You know, a couple years later, I you know, so and so who will remain nameless. And this is not just one person by the way. This is many of them. Got to invite them back on the show. And they’re a big celebrity name. You know, that’s great for the show and great for the listeners. And I bring them back on. And I just tell you, I’m disappointed. They just don’t really have anything to say. You know, there’s a concept. It’s a quote that Ray Kroc, the founder of the McDonald’s franchise system. Now everybody knows what that is because the movie, right? He used to say was his favorite quote, and here’s the quote, is long as you’re green, you’re growing. As soon as you’re ripe, you start to rot. So the goal of a person of an individual, of a family unit of a business of a city of a state of a country is to never become ripe. Always be green and growing. And a lot of these places have become zombies. A lot of these companies have become zombies. mean, when I was in the traditional real estate business, and I had my own company that eventually sold to Coldwell Banker, you know, before that, I would have lots of people coming in companies coming in trying to buy my company. And, you know, I would just kind of realize and talking with many of these companies, big famous companies, powerful companies with lots of money. I kind of thought to myself, once I knew the inside of their business a little bit, I thought, wow, this company, they, they went out of business 20 years ago, it’s just that nobody told them. And that’s true of many states and cities and individuals, you know, I mean, I mean, they’re like these people that, you know, made a lot of money at one point in their career, and they became successful and got a lot of recognition for it. And, you know, but you talk to him and it’s like, Man, you peaked too soon. It’s like, the famous story of the football quarterback in high school, right? Who was, you know, the guy that got all the girls and got the home. And then there’s homecoming queen, and probably those two were a couple, the football quarterback in the homecoming queen. And then you see him at the 10 year reunion, and then the 20 year reunion, and then the 30 year reunion. It’s like, Well, you know, what have you done lately? You peak too early. And, and you know, it’s all downhill from there. Right? So that’s the thing. That’s the thing about some of these economies, and we’re gonna talk about that today a little bit. So it’s interesting. Wow, folks, some other big things going on. Did you see that article? I’m looking at it right now Bloomberg article that talks about how stripe the payment processing company that by the way, we are a customer that’s a great company. They are now offering a one time payment to their employees who lives in office in New York City or San Francisco $20,000 to move out of those cities, or you know those areas, right, and work at home and move into a cheaper jurisdiction, a less expensive area in which to live. Because they know that the long term value of that employee if they’re not pressured with these extremely high cost of living that, by the way, are going down in these places as businesses leave, people flee. And you know, these are economic disaster areas, of course, but as people leave them, they know that the long term value of that employee will be more valuable because they won’t be so pressured and and they won’t have to give them raises and they won’t have to pay for expensive office space to Office them. So really interesting about that. And it just goes to show you how a private company Well, I don’t mean private in the sense of whether it’s working publicly traded or not, I’m not talking about that. I’m just saying a non governmental entity, right? A business can really screw things up for a local government. And they can say, Hey, you know, if you’ll move out of this poll, San Francisco, New York, we will give you a bonus to move. And I bet a lot of their employees are going to take them up on that. So it’s a way for a business to fight back against a intrusive government. That is just just ripping people off. We’ll see how that pans out. But I bet it’s gonna work. I bet people aren’t going to take the $20,000 in move. Also. Here’s another thing looking at, you know what I’m picking on New York a lot lately. Sorry, folks. You know, it’s just in the news, landlords. Lisa, one of our team members, she posted this great article in our content group. landlords are upset in New York City over a possible ban on background checks for renters in New York City. Now, they’ve already done these at one level or another in the Socialist Republic of California in certain places where like, you can’t check a criminal record for a tenant. Really? Is that fair to the landlord? You know, it’s like you’re damned if you do, you’re damned if you don’t, right. What happens? There’s this huge conflict of interest that says, Okay, well, the government doesn’t want you to discriminate against criminals. Now, that’s, I guess, the new protected class. If you’re a criminal, you’re, you’re going to be a protected class soon along with all the other protected classes. And that’s so absurd this, this just does not work. You know, this concept of group rights is just silly. It doesn’t make any sense. And all you have to do is go back to the brilliant eine Rand. And she said there is no such thing as group rights. There are only individual rights because The smallest minority in the world is the individual. Think about it. If you think a group has rights, you know, the group of purple people, or the group of people, whatever, the criminals, right, if they’re a group, right, and they have group rights. Well, what happens when people in the group disagree with each other? Certainly they don’t all agree. Certainly all the criminals don’t agree with each other. Certainly all the purple people don’t agree with each other. How can there be group rights? That’s, that’s just an intellectually dishonest idea. Yet we have that all over our culture of these group rights, you know? Gosh, just it’s just silly. How many things are taken as truth in our society that just simply aren’t true. They don’t stand the test of any degree of logic. When it’s applied to them, it just doesn’t work. So yeah, landlords are upset in New York City. So think of the conflict of interest you now have As a landlord, you can’t check someone’s criminal background. Yet, you move them in and put them next to if you own an apartment building there. You put them next to your other tenants who aren’t criminals. And then the criminals, they didn’t recover. So there’s recidivism, and they commit crimes against their neighbors. Now, can the neighbor sue you is the landlord saying, hey, you didn’t tell me you were putting a criminal next door to me. I thought you check people’s background when I moved in three years ago, you check my background, and you found out I wasn’t a criminal. So now you put a criminal next to me and you didn’t tell me about it. What do you do as a landlord? I mean, what do you do? It’s a total. It’s a no win situation. That’s what they’re doing. Okay, we got to jump to our guests. But oh, wait, there’s a couple important things. Number one, we’ve got a webinar for you. Now. This is going to be good. You ready for this? We already had one small group of people, the attendees of meet the Masters check this out in this is it’s something you’ve been asking for. Remember, we had that asset protection webinar that everybody really seemed to love. They said they learned a lot. And you know a lot of people got going on their asset protection and estate planning programs. So that’s great, but it wasn’t enough. So we brought our attorney friend back for an encore. Okay, so he’s back for an encore. You know, that clapping machine just goes on too long. It needs to clap and stop. But it keeps going. Anyway, we brought him back for an encore for an advanced webinar. Okay, where you can do a bigger step. And let me tell you, his prices are so reasonable. I’m sure he’s going to raise them soon. Because they’re way too reasonable. I went to an estate planning Attorney. And you know, he’s talking to me about how to protect assets and plan your state and all this stuff. He wanted to charge me $15,000, just to consult with me. And then for every LLC or entity set up as 20 $500 each, and I’ll tell you, with the attorney we’re working with and recommending, his prices are so reasonable. It’s absolutely incredible. So you can attend on Thursday, and that is tomorrow, Thursday, and then on Sunday, we’re running it again. And these are at 2pm and 8pm each day, so we’re running it, just those four times the advanced program that he offers where you’re going to learn a lot more to sort of add on to the other webinar you may have attended. If you didn’t attend it, it’s no big deal. You can just attend this one, you know, without attending the other. And you can register for either Thursday or Sunday’s event at Jason hartman.com slash protect Jason hartman.com slash protect, get yourself registered for that. It is a really good webinar with a lot of in depth learning about that topic, which so many of you have questions about so good stuff. All right. So do that. And if you need us, of course, reach out Jason hartman.com. And let’s get to part two and talk about the economy and the market with Leslie Appleton young. Maybe it’s a good time to ask you, you know, kind of our previous conversation off air, just about the the general vibe with California. I mean, people have been leaving the state for many years. I left the state you left the state. I mean, what what does the future look like for California just as a kind of a general comment, you know,
Leslie Appleton-Young 13:58
yeah, I think in general country’s rebalancing towards the middle and the South. And we’ve been tracking net domestic migration that you get through the Census Bureau, the American Community Survey for for many years. And there’s kind of a myth out there that it’s our tax structure. And the reality is we’re not losing millionaires. There’s actually a net small net gain in terms of people that are making higher incomes into California. But the story has been that we are losing young people and we are losing the working middle class, you know, working class because they can’t afford housing in California, be it ownership housing or even a rental housing. And I think now overlaid on top of this is going to be an obviously it’s too early to see in any any data. Certainly, we have anecdotal stories, but I think you’re seeing an acceleration of the story. Change fueled by the work from anywhere environment for, for white collar workers, no question
Jason Hartman 15:07
about it. And if you’re a billionaire or a deca millionaire or a center millionaire, it doesn’t matter, you’re just gonna live where you want to live, you can
Leslie Appleton-Young 15:15
afford to live here. They’re they’re not people that are hurting. Right, right, but may not be happy. I know, they’re not happy about their taxes, but I just look at the data.
Jason Hartman 15:24
Right, and they have all sorts of teams of accountants and lawyers to get them out of the taxes because they can do all sorts of special sophisticated things to try and cope with with the tax burden. But you know, if someone’s just you said, No your hair and I think we got to revise our saying on that because a millionaire employee use, you know, adjusted for inflation. It’s really no big deal to Be a Millionaire anymore.
Leslie Appleton-Young 15:48
Let me tell you, there’s a lot of people who just love lost their $600 unemployment supplement today that would see that as quite a quite a big amount of money. I mean, I know what you But no, I agree with you.
Jason Hartman 16:02
But I’m just saying that those people at the lower end of the socio economic ladder, they don’t have a very high tax burden. Even in California. Yes, the cost of living is high. But the taxes are not that high. where it hits people is those people making a million bucks a year? That’s the ones that really just get creamed tax wise, you know, just
Leslie Appleton-Young 16:23
saying that there’s a net inflow. Yeah. in that category. So
Jason Hartman 16:27
yeah, in the in the higher end, and so that, is that an inflow Leslie or is it a is it people that have risen to that level of economic achievement? I’m angry, we can’t
Leslie Appleton-Young 16:39
tell we we essentially just know the income of the people coming and going. So in terms of what their journey to that income level, we have no idea.
Jason Hartman 16:49
Yeah, okay. Okay, good.
Leslie Appleton-Young 16:50
Go ahead. You know, this is just a chart that looks at the various price segments. It’s the 2 million or more price point. category that actually had the the increase in in June and add into that that price number. Here’s a look at the kind of distribution of home sales by by region. And you might be surprised to know that the San Francisco Bay Area is only 19% of the total state even though they’re a huge part disproportionate share of the economic activity compared to the home sales and population number. Southern California is about 45%, Central Valley 23. And all of the major metropolitan areas had a drop on a year over year basis from June of june of 2020. The other code, other counties, categories are very rural, and are benefiting again, from what you talked about earlier, a flight to less density and more open space. So looking forward, we felt very confident About our June numbers, because pending sales in April, I’m sorry, in May were so high. And then looking at the data that we’ll be getting in the next couple of days, pending sales increased by 22 and a half percent, not the 60 plus percent we saw the month before, but still pendings is going to tell you where where sales are, are head. And so what you see here is just a big, a big bounce back in housing, once the regulations were lifted, and you’ve had a huge adaptation of technology in the real estate industry, and we’ve been kind of tracking this with, you know, using zoom calls with clients and using virtual staging and doing virtual tour tours and all of the tools that have been available for quite some time. All of a sudden became a not an option, but a necessity, and I think has been a huge facilitator. As in I think
Jason Hartman 18:59
the good news For the economy overall, it’s so convenient. And the funny thing is, none of this technology is new. You know, we will, it’s been here for many years. I mean, people have been making Skype calls for many, many years, right? And WebEx was around, I think 20 years ago, you know, but, but now everybody’s been forced to adopt it. So Necessity is the mother of invention. And it’s great news because there’s a certain amount of creative destruction going on, in all these old inconvenient. It’s making things a lot more frictionless. And I think that’s good for the economy. It’s going to increase the velocity of transactions velocity of money in many industries. You know, I’m looking for a new car now and I haven’t even been to a dealership, you know, it’s great. They’re, they’re doing like, you know, showcases where they give you these really detailed online tours via zoom. And it’s, it’s incredible. It’s really convenient apartment. A lot of apartment leasing offices are really adopting this technology really nicely. Yeah, it’s good.
Leslie Appleton-Young 19:58
Yeah, I don’t think there’ll be any Any going back and certainly the younger generations are so comfortable in a virtual world and this is just kind of for, for sale stirs to get with the, with the program. So a couple of I think I’ve indicated caution going forward, about 40% of our members last month said they expect they were noticing a slowdown in activity. And again, this was correlated with the kind of resurgence of cases. So the price side is a whole nother story. As I mentioned, we were at a historic high median home price in June, the specific number was 626,001 76 and a half percent up from May and two and a half percent up on a year over year, year over year basis. So that has been really incredible and as we look at it across all price categories in the state every every price category, you know is seeing is seeing a gain. And the biggest gains are at what I would call the top 20% of the market. And most of the pain of job losses is hitting people that are not homeowners, right, it’s hitting renters more because they’re in the service industries, which are lower paid. It’s and it’s really the white collar. And you can see that in these statistics that they are the ones that really are the lucky ones in all this, that are able to take and take advantage if they need a mortgage. And and
Jason Hartman 21:36
really, I think society reevaluate. And you know, this is just something that happens kind of slowly but reevaluate the amount of pay people get that you food service and grocery stores. I mean, why are these people so underpaid? It’s kind of strange, because these are the people that as we’ve realized society has depended on mean, if they
Leslie Appleton-Young 22:00
are the essential workers,
Jason Hartman 22:02
or the essential workers, these are the heroes, of course, the health care workers too. But you know, they’re mostly paid pretty well. But, you know, the people at the grocery store and the people making your food at a restaurant and it’s probably takeout food. Why are they so underpaid? I mean, it’s just just kind of strange how that sort of came about that way. I don’t understand it. Sometimes.
Leslie Appleton-Young 22:21
It’s called pricing power.
Jason Hartman 22:23
Yeah, pricing power. Well, you know,
Leslie Appleton-Young 22:25
lack of minimum wages in many, many areas. So it’s a it’s something to look at,
Jason Hartman 22:30
for sure. You do see it is just as a society, but the skills needed to do those jobs are not rare. So that’s obviously the reason you know, the demand is big now, but the skills aren’t, you know, they’re easily You know, a lot of people have those skills. Yeah. Okay.
Leslie Appleton-Young 22:46
So just I thought this was really fascinating. This was a weekly survey of our members. And we asked, hey, were the people that you talked to last week, the buyers expecting prices to go down in the initial stages of this when we started asking this at the end of May, early June 63% 67% said yes, my buyers are expecting to see lower prices. And now you get to the first week in August and less than half are so you’ve just had a gradual realization that that sellers are not with the program in terms of reducing their their prices, right, they’re not seeing a need to do that in in this this market. So a gradual, I think, shift in expectations about what’s what’s happening with prices on the on the fat on the part of buyers,
Jason Hartman 23:42
and so buyers are feeling a sense of urgency, and they’re not expecting any deals.
Leslie Appleton-Young 23:48
Well, less than half of fewer expecting deals today than were 10 weeks ago. Okay, but it’s still a loved it’s just a little bit below half and 15 percent of the realtor said they had a buyer who tried to renegotiate a purchase price before the close of escrow. So there’s still some of that going on. So here’s a look at you asked me a question earlier about what was normal inventory. And I said that up until 2012. If I took a 30 year average, it would have been between six and seven months. And if you look at this inventory index, it again goes back 15 years to 2005. You can see starting in the beginning of 2013, the average has been between a three and a four month supply. So we’ve just entered a new normal, if you will, and 2.7 is low, but it’s nothing we’re not we haven’t encountered before, during this period. And again, I mentioned all of the factors that were growing, but what hasn’t grown is new construction, at least in our in our state. So that’s that’s been an issue. And boomers are staying in their homes longer, right. There’s a financial incentive, they don’t want to pay the capital gains. Gains Tax is certainly one of the reasons prop 13 is another but when I started in the 80s people moved in California about every seven years. And now it’s about every 18 years. Wow, just triggering. Yeah, a huge shift. And we’re becoming a little bit more like the European model.
Jason Hartman 25:37
I was gonna say Europe has this very stagnant market where there’s just not much trading going on.
Leslie Appleton-Young 25:42
Okay. Kids inherit their parents homes.
Jason Hartman 25:45
Yeah. And I attributed that Leslie to, you know, the fact that obviously, prop 13 I think actually hurts the market in a lot of ways because it makes people stay put to some extent.
Leslie Appleton-Young 25:58
Yes, absolutely. I mean, just do the math. Right
Jason Hartman 26:00
now, so prop 13 is the Howard Jarvis, you know, from back from 19 1978, the thing that kept property tax increases in the state of California. So, you know, people won’t trade their house because they’re gonna have to pay such a higher tax bill on the new property, because because of the higher prices, but also, you know, the very low mortgage rates, you know, I think is it’s kind of another thing that it’s not as big because people can always refi but, you know, sometimes the mortgage rates encourage people to trade houses when they’re really cheap, because they get an automatic refi when they trade and they get another house that they ostensibly like better. You know, if if those mortgage rates are higher, it really keeps people stuck and makes the mortgage market more stagnant because, you know, you just don’t want to lose that great mortgage you have. And I think that’s one of the dangers of these very low interest rates in the long term, is that it really causes the market to just be less active. What do you attribute it this dramatic rise from seven to 18 years to is it mostly prop 13 issues or what?
Leslie Appleton-Young 27:10
I think it’s, it’s just doing the math. You know, there’s, there’s certainly societal factors, right? I mean, 70 is the new 50. You know, people are more active, they don’t want to move to some city or Leisure World like their parents did, and quote, unquote, retire and sit on a golf cart all day. So they’re just more with the mix. But, you know, what you find is there’s a lot of people who really don’t need a five bedroom home anymore, but the math just doesn’t work out for them. And what we hear over and over again, is it’s really the capital gains issue. Now we are, we have a proposition on the ballot in California coming up, prop 19, that’ll help people over 55 to to move and take, you know, their tax basis and so on. So that might might help a little bit but we can’t do anything about the fact that people have no huge gains. I mean, if someone’s been in their home 30 years in Palo Alto, you can imagine there just is not going to be a way to to have it work out in terms of the numbers. Maybe we could always rent it for a couple of years, which will never make sense in Palo Alto, and then do a 1031 exchange. But yes, I totally agree with you. It’s Yeah, yeah. So anyway, moving on. Here’s just a look at active listings, which have been declining on a year over year basis for the last year. And in June, they were down almost 44% from June of 2019. So
Jason Hartman 28:45
Leslie Appleton-Young 28:46
I know, right. So when we focus when you mentioned the need to focus on the supply side, I could not agree more.
Jason Hartman 28:54
So let’s talk about that for a moment. So a massive supply shortage. Do you think California or you know, it’s really up to various municipalities. But we’ve got it well, it’s not not completely, but you know, they’ve got to loosen up on these these building requirements, you know, and maybe make it a little less expensive for builders to build homes and loosen up on the environmental restrictions. I mean, the Coastal Commission in California, you know, you can’t build anything if you can see it from the ocean. It’s it’s absolutely crazy. Do you see this happening? Or is the state just going to say no, sorry, you know, tough.
Leslie Appleton-Young 29:33
I think it’s, it’s that and it’s also neighborhood attitudes, which you find over and over again, are just simply opposed to anything and everything. And one of one of the things I’m really proudest of at car is a couple of years ago, we created a legal foundation called Californians for housing, and we are writing letters and then going in and suing cities that essentially are forbidding a project that meets all of the qualifications. And you know, every municipality has housing goals, right, there is a housing rent, you know, requirement that they’re supposed to meet, and none of them do. So it’s really time to play hardball a little bit and have people understand that this is something that can actually be a huge, huge benefit. So here’s the thing about them.
Jason Hartman 30:33
I mean, you would think that the municipalities want the property tax base, right? Because that’s brings them rather than commercial
Leslie Appleton-Young 30:39
property tax. The residential property
Jason Hartman 30:42
tax, that’s where I was going, Leslie, since nobody’s going to build any retail properties anytime soon. And nobody’s going to build much office space because we COVID has just creative destruction. You know, the home is the center of the universe, as I’ve been saying, and so you know, They’re just not going to have that they might have warehouse and distribution centers, but they’re not going to see a bunch of retail construction or office construction. Right. Also there is some light, it may be the the the alternate use of like hotel properties, turning them into residential and the possibility of even converting 30 offices or shopping malls residential. I don’t know, to me, this is a pretty complicated expensive venture, but the hotels for low income housing, you know, turning hotels into little condo units is pretty doable. What do you think?
Leslie Appleton-Young 31:34
I couldn’t agree more, I actually have that point at the end of my presentation that that could be a real silver, silver lining and even a mall, you know, it could be come of senior housing village or affordable housing village or a homeless village. It’s got plenty of parking, you know, and there’s going to be more and more of these because people’s behavior has has changed and it’s been changed. For a long time, right, the department store has been an endangered species for decades. But this has really been kind of the end of the line for, for some of them,
Jason Hartman 32:11
Leslie Appleton-Young 32:12
So we’ll see. I here’s a kind of looking, again, at the weekly data, just show here, the average daily pendings. It’s been going up and down, but going down a little bit lately. And then I wanted to also say there’s been some changes that our members have seen that I think are really interesting. So 28% said they had noticed an increase in clients looking for second homes. And again, that’s rarefied air right now, but it’s indicative of the kind of work from home opportunity and less density, desirability. And then the other was Have you increased interest in selling investment properties and in the first week in August About a third of them said, said yes. So I think that’s a whole nother topic about owning rental property California right now that is, and the eviction wave. I mean, there’s, you know, people that are looking to get out. And then just in terms, we talked earlier about utilizing the tools. So over half of the realtor said, Yes, I’m doing a lot more virtual tours under COVID. In the first month of August 17%, said, I’ve actually put a buyer into contract who never saw the house. And, again, that’s something we didn’t see before. And almost half of them said they had a vacant listing. And in the world of COVID, it’s a lot easier to show show homes that don’t have a homeowner living living in them. So we’re seeing more of that. So those are just some of the threads that we’re following. In terms of the forecast, you know, everybody’s got a letter Square root on there. I’ve been talking about the spring.
Leslie Appleton-Young 34:02
All right, there you go. There’s just a lot to talk about here. I’ve been list originally in the swish category. And now I think I’m probably in the W category. But again,
Jason Hartman 34:14
what she’s referring to, for those listening is referring to the shape of the recovery is going to be a V and W u square root. A swoosh and Nike swoosh. That’s what we’re talking about. Go ahead.
Leslie Appleton-Young 34:26
Right and then I just got a the forecasts from NAR, Fannie Mae and NBA that really mirror the trajectory of the GDP forecasts that we saw in the very beginning of my presentation with the big drop in sales on a year over year basis, in the second quarter, and then recovering after that. Okay. And in terms of prices, very little impact. Certainly. is a bit of a softening but everything in the low single digits with a delayed impact right prices are typically sticky on the way down until they’re not. But here you can see the big, the big hit and again the biggest drop was in a RS projection of a drop in the fourth quarter of 3.1%. And then by the middle of of 2021. Definitely back on track and well above where prices were a year ago. And then this is just a look at where we are with the California Association of Realtors kind of looking at where we are now to the end of the year ending up and I believe I put in the I didn’t put in the the chart but essentially what we’re looking at is about a 12% drop in home sales 2020 compared to 2019 and at this point about a 1% drop in the median home price. And we’re revising our forecast every month just because more data is very helpful in a in a world like this. But I would just say, you know, housing is a leading force coming out of the engineered recession, this time around. And we’ve seen that the last couple months. And while the future looks a little bit choppy based on how we do with the virus, I think the housing market is is just ready to, you know, ready to run. And then I’ll close with just a couple comments about what I think the future is going to look like. And just noting and we’ve talked about this the the work from home work from anywhere. New Order, I think is going to be huge for housing. It’s not only what type of house do I want to live in and and how many of these white collar workers are now looking at meeting not just one home office but to home to home.
Jason Hartman 36:58
What about the kids together? One There
Leslie Appleton-Young 37:00
you go, you know, you need, you know, a house isn’t just a house anymore. It’s where you work out. It’s your restaurant. And one thing we didn’t really talk about was how many? How many more houses are multi generational, right? You know, thinking twice about putting your parents in a system where they’re gonna die.
Jason Hartman 37:19
Yeah, right. You know
Leslie Appleton-Young 37:21
exactly. So, this was a really funny exercise that someone initiated on Twitter a month or two ago, asking people to post a picture of their home office. And for anyone who’s listening, I have six pictures that show a laptop on top of a washing machine, a laptop in a closet alcove, a laptop at the end of the loft that’s about three feet wide a laptop, in a kid’s room, and at the kitchen table and on a trash can outside. In other words, there were a lot of people that simply don’t have the type of home That makes working from home. easy to do. Right? So I think the winners coming out of this will be in as I’ve already said, residential real estate. Absolutely. The tech enabled agent has a huge advantage. And the good news is there are a lot more tech enabled agents today than there were six months ago. An agent who is able to leverage technology to enrich relationships with with clients, and the transition of commercial and retail, and as you mentioned hospitality spaces into on new to housing. So those would be the four kind of closing points. I would make
Jason Hartman 38:46
kind of looking forward. Good stuff. So Leslie, I have to ask you, thank you for that. By the way. I have to ask you, when we look at what’s coming, though, we still have some definitely some clouds on the horizon, right? I mean, we We’ve got forbearance. We’ve got foreclosure moratoriums, we’ve got eviction moratoriums, are these chickens going to come home to roost here at some point? Because the economy is definitely, it’s very uneven. Okay. It’s very uneven. Some people, like you said, doing great, some people really suffering. It’s very sad. And then even in a lot of ways, what about next year or the year after? I mean, I don’t know, from from looking at this kind of stuff, it would seem like we’re all in the clear for a long time to come, but maybe not.
Leslie Appleton-Young 39:33
No, I mean, it really, I think all comes down to the kind of relief that the government is going to grant to the unemployed. Over the next six months or however long the economy remains essentially paused. And that it all depends on that when you look backwards, I would say the government did an amazing job of getting relief out quickly. Were there people that got PPP loans that shouldn’t have, of course, are there people that are getting more in unemployment than they did when they were working? Yes. But you know, the the general tenor of what was done was to support the economy when it was shutting down by providing people with an income necessary to pay their rent and in an eat and that’s what was done. And it was fabulous. And it’s it’s one of the reasons why we haven’t seen these things that you’re talking about, you know, coupled with the eviction moratorium and so on. Going forward from today. I don’t know, I think there will be some type of relief. But how long can that go, you know, half of the rental properties are owned by small landlords that also have mortgages to pay. So there’s a lot of levels of levels to this and it certainly is the thing. That’s key up at night, and I think we’re all watching the monthly core logic data to just see how many people are 90 days behind how many people are 30 days behind. Now I know not sure what the exact number is I think about a third of the people that got forbearance are still paying on their mortgages, many, you know they took it out as an insurance policy. But that’s the date I think we need to keep keep a really big, big tabs on because we know from the Great Recession how quickly this can shift when people start losing their homes. Yeah, very interesting stuff. Leslie if you want to share a website or just in wrapping up with a closing thought for us. I really appreciate being here today. I’m extremely optimistic about real estate, going forward with a tremendous amount of concern for keeping the economy going long enough that we can just hit the hit the ground running. Our website is car dot orgy and we do have information there on on the market and on the virus and we just try to keep our members informed and being able to be the best possible advisors to their to their clients
Jason Hartman 42:10
and stuff. Leslie Appleton young. Thank you for joining us.
Leslie Appleton-Young 42:14
My pleasure. Thanks for having me, Jason.
Jason Hartman 42:21
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