Jason Hartman looks at Freddie Mac’s promotion of increased homeownership. He discusses whether this is helpful for homeownership. Jason also briefly talks about what Ali Wolf of Myers Research said about our homes being the only constant in times like these. Lastly, he talks about the change in rental numbers in New York City’s real estate.
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. And now here’s your host, Jason Hartman with the complete solution for real estate investors.
Jason Hartman 0:54
Welcome to Episode 1513 1513 well Freddie Mac, one of the two venerable government sponsored entities promoting, I want you to really let that word settle in promoting home ownership. And what happens when you promote something? Well, if you’re successful promoting it, then more people do it. And that’s exactly what has happened. As more people chase a given supply of any product in any marketplace, and that supply is somewhat constrained as it is with homes and improve real estate in general. What happens? Well, the basic law of economics is supply and demand, of course, right. We all know that. So Freddie Mac is celebrating their fifth year anniversary five decades. They’re not as old as Fannie Mae. That’s an even bigger one, a bigger offender. But guess what? Freddie Mac in celebrating their 50 year anniversary. They are also celebrating $10 trillion. That’s with a T trillion $10 trillion in funding the American dream.
Jason Hartman 2:22
Yay, Freddie Mac. All right. $10 trillion pumped into the housing market. What do you think that did? Do you think that actually promoted homeownership, or ultimately hurt homeownership? See, this is the Keynesian left wing ideology right here. It’s a perfect example. Because what they always do is they pump money into a system into a market. They did it with Sallie Mae. What did they do? Well, they insure student loans, kind of a similar result of providing a secondary mortgage market like Freddie Mac does and Fannie Mae do does. Forget about grammar. It’s not important. Nobody cares anymore. Nobody cares if you can spell or speak properly. You know, it used to be cool to be a winner. Isn’t that weird? How that just totally changed. Now it’s cool to be a loser. It’s cool to have bad grammar. It’s cool to misspell everything you write on Facebook and not know the difference between your and while you apostrophe II mean, college educated people apparently they didn’t get much out of college, except a lot of debt. Yes, they got a mortgage without getting a house. And then they came along and they went to Freddie Mac or Fannie Mae. And what happened there? Well, they got a mortgage and they got a house. slightly better deal. But what would the price of that house have been if Freddie Mac had not pumped $10 trillion into funding the American dream? Oh, so patriotic. Thank you, Freddie Mac. Thank you, for government bureaucrats for creating freddie mac and fannie mae. I think I’m the only person in real estate that is opposed to these entities, because this is what the left wing always does. They always pump money into something and while they’re pumping the money, everybody on the receiving end of the money like all the mortgage people in the mortgage industry, all the realtors in the real estate industry, all the homebuyers that you know, get to buy a home with a better loan, and all the home sellers to get a more liquid market because there’s more money flooding the market causing the price to go
Jason Hartman 5:00
Ah, yes. Up, up, up and away. Yeah, that’s what it does when the money floods in just like college tuition, right? The money flooded in, in the 70s. And what happened to the price of college tuition? It became completely absurd. It’s a total ripoff. We know that we know it’s a complete ripoff. And listen, as I’ve said many times, you’ve heard me say it. I am certainly in favor of higher education. I think it’s awesome. It should just be reasonably priced. It’s a massive, it’s a massive ripoff. And you know what? I hate to say it to you, but the prices of houses are too high. Who in real estate says that but yours truly, right. Am I doing what Sara says I might do be doing? am I shooting myself in the shoe? inside joke if you haven’t heard us talk about that. You regular listeners know what I’m talking about shooting yourself in the shoe, not the foot the shoe itself. Yeah. No, I’m not because I’m just looking at the overall big picture of the market. And so back to that concept, right, as the money is flowing and being pumped into the market, and as imbeciles like Joe Biden, bless his imbecilic heart, as they want more grants and more money, and, Oh, we got to give more student loans. We got to give more assistance for this thing. And the other thing and that thing and all these things, although there’s no, there’s no limit, the number of things we can assist with and we can pump money into. And naturally anybody who knows the Basic Law of economics, supply and demand knows that that creates in violation. inflation. How do you like my homemade sound effects? Pretty bad, huh? Yeah, it’s pretty awful. Okay, so anyway, this is a housing warrior article. Celebrating 50 year anniversary highlighting the $10 trillion in funding for the American dream. Thank you so much Freddie Mac, they released an interactive map that breaks down its funding by state for both single family homes and multi family rental units. It has financed since 1970. Of that $10 trillion. The vast majority 9.8 trillion was for single family loan funding. Okay. Just, you know, just two tenths of a trillion I guess that’s what $200 billion went to multifamily. Most of it went to single family. Okay, great. Thank you Freddie for pumping up the prices of single family homes artificially. But here’s what happens folks. You can’t unwind this stuff. It will never be unwound back in 2011. You might recall if you’ve been following us for a while. time this was nine years ago at meet the masters of income property in Irvine, California. Back when our events are alive and not virtual, like the one we have coming up that many of you are buying tickets for at Jason hartman.com slash masters. Shameless self promoter. Okay, that was a just a subliminal message that if you didn’t buy your tickets yet, you should go get them right away. Jason Hartman, calm slash masters. They’re selling like hotcakes. Anyway, so we stood up there and said that, you know, we would actually welcome the idea of seeing Fannie Mae and Freddie Mac go away. Why, why were we shooting ourselves in the shoe? Well, you know, there would definitely be some temporary pain in some ways from that boy. But one recommendation, dear listeners, don’t slap yourself on the cheek. That actually kind of hurts. I’m abusing myself here. Jason, you’re an abusive person. I know. Sorry. Yeah, I, I slapped myself on the cheek for sound effect purposes. And that kind of hurts actually, fortunately, you know, just don’t Don’t do it. Don’t try this at home, folks. Although I’m at home. That’s why I just did it. But I’m a trained stunt man. So I can do it. Because when you go to podcasting school, you have to concurrently enroll in the stunt man course. Or sorry, the stunt person course. Actually, that’s discriminatory to dogs and cats. The stunt living being course. Well, that’s discriminatory to inanimate objects. Okay, the stunt course. Well, what about people and inanimate objects that don’t do stunts that’s discriminatory to them? Okay. I don’t know if you have a solution for this. problem we find ourselves in, go to Jason hartman.com slash ask and tell me how to say it right. Anyway. Don’t try it at home. So what was I talking about? Yeah, you have all this money that has gone into this market. Oh, Fannie and Freddie going away. Probably not gonna happen anytime soon. But there was some real serious talk about that for a while. And why would we like to see it go away? Well, because it’s a market distortion mechanism. It’s a massive distortion mechanism. And we don’t like distortions in the market. We like real economies. Because Hey, honest sound money on a sound economy. Sounds good to me, but don’t expect it anytime soon, because it just ain’t gonna happen. But what would that do? Well, temporarily it would cause prices to decline, but it would also put massive massive upward pressure on rents and remember, as prudent sound legitimate real estate investors that We are right, all of us are like that. If you’re listening to the show, you know, you’re a legitimate prudent investor because we don’t talk about any of that hokey crap that you hear elsewhere. So, you know, that would put upward pressure on rents and look, we invest for yield, we invest for rental income, more than price changes. So yeah, that’s, that’s pretty interesting. So they tout this as some great thing that Freddie Mac has done. 10 trillion in funding for the American dream. How can you say no to that? Jason? Are you Scrooge? Yes, maybe I am. Maybe I am. Okay. So and then one of our listeners commented on that post, their headquarters is right here in McLean, Virginia, okay. Yep, there it is. Alright, so you got Joe Biden out promising more giveaways. completely ridiculous. Oh, here’s what happens though. So the problem is the tenure of these presidents and politicians and people, you know, they only care to dole out the goodies when it does good for them, and they’ll keep doling it out as the inflation increases over time, right? But usually 30 years later, they’re not really around for the consequences of their crappy actions, or the whole thing’s been so murky and obscured. And of course, no one really understands economics because, hey, they don’t teach legitimate financial things in school. And so nobody understands and they just keep voting for these idiots that do this stuff that really always hurts the people they say they’re trying to help. That’s that’s what it always it always ends up that way. It just it just always ends up that way. So I think I told you this yesterday, but one of our prior show guests Ollie Wolf, Chief Economist for Myers research, my friend Jeff Meyers company, when life as we know it got turned upside down. Our homes became the only public constant, the shift toward at home work, school. And hobbies, however, resulted in a rethink of our space that propelled new home sales to the highest level since 2007. And I tweeted that quote, because Ali and I very much agree, as I said, when this first happened, when the whole thing broke out the the surveys of sickness when it broke out, I was, you know, like the first person with that whole concept, right, the Holmes center of the universe, and boy, have we ever seen that come true? We certainly certainly have. So it’s pretty interesting what’s going on. And with that in mind, I have a couple of charts I want to share with you. And by the way, we’re going to get better at this. We will also be announcing the launch. Finally, you know, it’s like that old commercial for earnest and Julio Gallo. If you’re old enough to remember the commercial What did they say? We will sell them No wine before it’s time. In other words, we got an agent make sure it’s just right. We will sell no wine before its time. But the exciting news is we are launching the long awaited, much requested empowered investor network at meet the Masters, which from today is only eight days away. Lisa? Yes, I’m talking to you, and other investment counselors, other team members. Are you ready? This is what our clients have been asking for. And I probably shouldn’t have been talking about so long ago. But we will sell no wine before its time. And we are going to launch this at meet the Masters very exciting. So we’re going to have all these charts in there. Really, really good information, good information there. Look for more information on that and then of course after meet the Masters will tell the rest of you folks that for whatever reason, did not get a ticket to meet the masters. I know You will be envious when you’re sitting around. Not this weekend, but the weekend after thinking I could be learning about all this great wealth creation education, but instead, well, I chose to watch TV. Don’t let that be you. You don’t want to you don’t want to be Homer Simpson, right? Okay. Jason hartman.com slash masters solves the problem. And by the way, many of you have asked about the recordings that don’t even exist yet because we haven’t had an event to record, but we will have recordings and we will offer them after the event. But you also can purchase those for a very good deal when you register for the event. And some of you aren’t seeing that because it’s on the last page of the registration. So those recordings are offered to you at the end, and they’re only 97 bucks. So check that out. Okay, now we’ve talked quite a bit about inventory. We talked today again about supply and demand and I am looking at two charts. I just got this morning from the Wall Street Journal. And they are very, very telling. So the first chart says, existing home sales rose sharply in June. Remember whenever you look at statistics that you always have to, number one, have read the book, or it’s now on audio, by the way, that old book, how to lie with statistics because they’re always telling a story with statistics and many times the story is a lie.
Jason Hartman 16:29
But you also have to ask yourself, what are they actually telling you in the chart? This chart is existing home sales. Mom chart, mom meaning month over month, now it is not new home sales, it is not all home sales, and it is not regional home sales. And it is not home sales in a certain state or city or you know, bigger region like you know, this southeast or, you know, big region, and it’s not homes in a certain price category. And it’s not detached homes versus condos right there, all of these layers and things. This is existing home sales month over month, and they rose, like to the stratosphere in June. In fact, they rose by 20 I’m looking at the turtle, it’s like 21% and that is the highest month over month increase as far back as the chart goes, and the chart goes back 20 years to the year 2000. So times they are a booming the last time that we got close to this much of an increase. The second biggest increase was in 2000. You know, see the chart doesn’t do every year so it looks like 2016 So probably Yeah, that was probably a Trump bump. Okay, hey, listen, love him or hate him. Trump is damn good for the economy. I’ll tell you that. But if you hate him, he’s kind of easy to hate. It’s his own fault. He says, things that are just, you know, Donald, why do you have to offend people so much? It’s just, I don’t know, maybe it’s brilliant. Because then you’re wagging the dog. Everybody’s talking about that. And you’re behind the scenes doing other work making other things happen, and that might be brilliant. But on the surface, I don’t know you just piss everybody off. So whatever. Anyway, back then the Trump bump of existing home sales increase month over month, which really did skyrocket was 14% versus now 21%. So the highest increase in two decades, pretty phenomenal, but we always must look at the other side of the equation. Did I say that right? I think I said equation in addition to taking stunt classes, stunt man stunt person stunt, living being classes, whatever they’re gonna be, I think I’ll take a diction class also. So the other side of the E Quezon would be of course inventory. What has happened to inventory? Well, I’m looking at a chart here now, that is comparing 2013 through 2020 inventory. And again, what I’ll do for these, I’ll get these in the show notes. Okay, so I’ll have our producer, Josh put them in the show notes at Jason hartman.com in the podcast section, so you can actually see the charts but I think I’m doing a pretty decent job of explaining them to you. And of course, we’ll probably show these exact same charts at masters because it’s very topical. So this one shows that inventory is literally at the lowest point in now. This is month over month. Okay, and this is National Association of Realtors statistics By the way, that’s another layer. What is the source of the stats? Is it National Association of Realtors? Is that the office? What is that acronym? Oh fail. You know what I mean the Office of Federal Housing oversight. I know I hate to admit I haven’t thought about it lately and I can’t remember what the acronym is. Exactly. But you know what I mean? You have all these different sources of statistics. You know, a lot of times they’re published by like just Zillow. Okay, but NAR is a big source of statistics. Okay, National Association of Realtors, the largest trade organization on Earth. I was a member of this organization for 19 years. And you know, listen, you got to understand they have an agenda. Of course, they want to be like Fannie Mae and Freddie Mac. They want to promote housing, promote homeownership. Well folks, what happens when you promote something price goes up for whatever it’s worth. So anyway, the inventory we’re looking att inventory all year this year, even prior to COVID. Okay, prior to this surveys of sickness in January, it was going on, but no one was talking about it. Inventory was rising a little bit through February and through March, it went up a little bit more. And then down in April, nobody wanted to put their house up for sale when a bunch of germaphobe concerns would arise, right? They didn’t want a bunch of people tracking in you know, the virus into their house right. Then inventory went up a little bit in May as we saw the delay of the spring selling season, and just ever so slightly up in June, but inventory is dramatically lower. Literally it is, let me see this line is 2018. And this line is 2017 which are about the same for this time of year an inventory and this one would be boy, these colors get so close. It’s almost hard to tell, that would be 2015 or no 2019 I think Inventory very low, about the same by the way based on June, but literally about 30% lower now than it was then. And then in the prior years when inventory was even better, much higher much higher, so pretty big inventory shortage to say the least, and booming booming sales so when you have high demand and low inventory, naturally you have the price is going to be pushed up. So can gratulations investors and if you can get your hands on some good properties now, do it. You know, don’t sell your soul, but you know, sell part of your soul, it might be worth it. Okay, just sell a part of your soul not the whole thing, or you know, put it up as collateral, because you really want to get a hold of more properties right now. Very good time to do it. By the way, we have another live stream Coming up on Sunday, Sunday morning 8am Pacific 11am, Eastern coffee talk, tea. Okay, that’s coffee talk. And we are going to have carry on with me and I think we’re going to have the other carry as well. So we’ve got a male and a female carry. I’ve asked Carrie Lutz, who’s been on many times before to come and discuss his bubble presentation. Two years ago at profits in paradise in Hawaii. Many of you were there with us. That was a great time and really fun to have an event in beautiful Hawaii. He gave a great presentation, which just I was really pleased to hear it on the history of bubbles. So we’re going to see if we can do that one on Sunday on the live stream and that’s free to join us on Facebook or on YouTube. Last week, we had a problem with YouTube because we had a scumbag who reported the live stream and they just when it was flagged, they just took it down for no reason. Whatsoever because we live under tech tyranny and that’s the way it goes. But we will be up again this Sunday, Facebook and YouTube. So you can find us on both places on YouTube at the Jason Hartman or sorry, on Facebook at the Jason Hartman comm page and on YouTube on our main YouTube channel, of course. Okay, so look for that and join us for the live stream. You know, those usually go about 90 minutes there live, you can ask questions, we love taking your questions. So questions, comments, criticisms, yes, those happen occasionally. They are rare, but they do happen occasionally. Because it can’t please all the people all the time, and we’re not going to try. We’re not going to try. So real unemployment numbers. We had john Williams on the show before, he’s the founder of shadow stats with some fascinating data. This was years ago on the real unemployment rate. And we’ve got a really good update for you on that. And so we’ll try to get to that next week. It’s a it’s a big deal. involved. It’s a rather long conversation. But I think you will find it super duper enlightening. And that’s coming up because it’s not what you think folks, unemployment is quite a bit different than the government would have us believe. And of course, it’s very lumpy and uneven. So, so that’s that. Now, we’ve talked a lot about the migration out of the cities. And I’ve got an interesting clip for you on that. And this is from CNBC. They’ve got a fantastic YouTube channel, by the way, you know, I get on CNBC case, because what do they promote, they promote the stock market, a modern version of organized crime, but they really do do a very good job. I got to hand it to them for their editorial, and for their, their YouTube channel. I like it very much. And there’s some good stuff. So I’m going to share this clip with you just part of this on what’s going on in New York City. Because here you can hear it. This is exactly what I predicted months ago. It’s all coming true. So let’s take a quick Listen to this.
A clip from ‘CNBC’ 26:02
Housing rentals out of New York City coming in a lot worse than expected but the city emptying out fast or Robert Frank has the numbers Robert Morning. Good morning, Sarah. Good morning. These numbers just out showing the worst June in over a decade for Manhattan rentals as more renters moved out and a lot fewer moved in the number of new rentals falling 36% compared to a year ago, average prices per square foot down 6%. But the big worry here and the big numbers was this rapid rise in.
Jason Hartman 26:31
Okay, so the number of new rentals. Now this is interesting. Available down I 36%. The average price per square foot down. I mean, when does the rent ever go down? Except in Detroit? Okay. It actually has gone up in recent years because it’s just gone up everywhere. 6% is the average price decline in New York City per square foot. And remember, New York City. I’m not picking on It’s just a proxy for any other high density, urban area. They are all experiencing the same essential thing. Of course, the numbers will vary a little bit but downtown Los Angeles, downtown San Diego, San Francisco, you don’t even have to say downtown because San Francisco just is all downtown. I guess, York City’s almost all downtown to you know, downtown Seattle, downtown San Diego. I think I said that, you know, Miami, any of the northeastern areas, you know, Washington DC isn’t quite as high rise oriented, but still as a bit of the problem. DC is a little bit weird because it’s got all the government handouts and you know, that’s it’s a little bit different, but not terribly different. Of course, you know, Boston in any of these flagship type cities and then around the world to it’s basically density, high rises, mass transit, those are the danger zones. So those are the places we want to avoid, but the average rental price in New York City and I’ve quoted prices like this before many times and by the way, this is from Douglas Elliman, real estate. Remember we had Dotty, the CEO of Douglas, Elliman on the show just a couple of months ago. And remember some of the insights she was sharing see what she was just sharing nuggets of information about what’s going on in New York City and the surrounding areas. And she was in the Hamptons, when she did that interview with me. So really interesting, but average rental price $4,032. And that doesn’t say the size of that place, but I’ll just tell you because I have several friends that live in New York City. And that is anywhere from you ready? 600 square feet. Yes, that’s all for $4,000 a month, give or take to you know, what’s the largest you’re gonna get? I don’t know I’m no expert, but I’d say it’s can’t be more than 1000 square feet. So it’s, you know, $4 a foot for a rental. Now, those people as they flee New York City, they can simply move to one of these suburban properties that you own that you bought through our network at Jason hartman.com slash properties. And they can get a property that’s 1200 1500 1700 square feet, maybe even more. And they can get that for 12 1300 dollars a month, maybe 1900 or $2,000 a month, you know, that would be kind of the range in our network. And they’ll get a two car garage and a yard and traumatically improve their life. They’ll be living in a lower income tax area than New York City. And it’s just a better deal. And they’ve been working for months, telephonically and with web meetings, and it doesn’t matter where they look now. So the whole value proposition has just dramatically shifted. You listeners are in the right position. Let’s count our blessings because we are really in the right position to take advantage of what’s going on in the world. Let’s hear a little more
A clip from ‘CNBC’ 30:13
empty apartments inventory of rental listings. Sorry 85% we now have a vacant that is the highest in Manhattan on record. Okay, so he said,
Jason Hartman 30:23
let’s just back that up a little bit here. We gotta just hear that again. That is absolutely mind boggling. Here we go.
A clip from ‘CNBC’ 30:33
Rising empty apartments inventory of rental listings, sorry 85%. We now have a vacancy rate that is the highest in Manhattan on record now lamp
Jason Hartman 30:44
so inventory has almost doubled that is amazing.
A clip from ‘CNBC’ 30:50
But basically to fill all those apartments with discounts and incentives for the one bedroom will not now cost you 30 $400 that is still twice the national average. But uh, A lot more discounts being offered now. Half of all rentals in June came with concessions and the big declines were in larger, more expensive apartments rentals for three bedrooms falling 42% brokers say that families that would have typically rented those bigger apartments have a lot of them left for the suburbs either for the summer or we may find out for good. Now more than two thirds of New Yorkers rent. It is the largest rental market in the country so we could see a cascading effect throughout the summer on the big landlords like Blackstone and related we also have property taxes are the biggest source of revenue for New York City. And of course,
Jason Hartman 31:38
in by the way, we’ve only just touched on that a little bit on the show. But this is the next big wave of economic hardship coming. It is for these municipalities and their property tax base that is just being hauled out. Really that is going to be a severe, a severe problem for these municipalities. You know what they’re gonna have to do? They’re gonna have to buddy up to the feds to get bailout money. That’s what’s gonna have to happen, my prediction
A clip from ‘CNBC’ 32:12
on the broader economy so these are gonna be numbers to watch in June and more importantly in July when we finally see the market reopened and brokers are able to show apartments, whether that demand is still there,
Jason Hartman 32:23
and that demand is not there. So, check out CNBC, his YouTube channel. That was another one of their great videos there. All right, we better wrap it up for today. Meet the Masters tickets, Jason hartman.com slash masters. Join us for the live stream on Sunday, where we will be live taking questions, YouTube and Facebook for that and until tomorrow, happy investing.
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