Southeast Housing Boom Continues, What’s The IDEAL Investment?

Jason Hartman starts the show by explaining the acronym IDEAL, which stands for Income, Depreciation, Equity Growth, Appreciation, and Leverage. Jason explains why income property is a multi-dimensional asset class that allows you to make money beyond the basic “buy low, sell high” investment plan that others teach.

Later, he brings on investment counselor Adam to discuss a market they are both very excited about, the Southeast. Adam explains why Florida is growing at a staggering rate and gives us insight into Texas as well. Later they go into why the housing market is outperforming every other asset class, including Wall Street.

Announcer 0:02
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 multi millionaire 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, everybody. And good morning. Good morning, wherever you are in the world. This is Jason Hartman. And I’ve got Adam here with us. And the gold color already says Good morning, you’re so fast. Wow. That took like 10 seconds to get the first Good morning, post your questions and comments if you’d like we will try to get to all of them. This is rather than our normal coffee talk that we do on Sundays. This is a little bit more of a presentation a podcast episode four, and I believe we’re on episode 1557, if I’m not mistaken, and I wanted to talk today about the booming south eastern real estate market. And just you’re going to be astonished, because Adam has put together some slides and some info and it is just going to amaze you at the inventory statistics, the inventory statistics will blow your mind. Are you ready to have your mind blown? Adam? Are you ready to both minds?

Adam 1:58
Oh, yeah, let’s do it. This is my mind, which is why I put slides together. Yeah, good.

Jason Hartman 2:03
Well, hey, before we start, I just want to remind everybody, that real estate is the ideal investment income property is the ideal investment. Why? Because as it says on the screen, it offers income, depreciation, equity, growth, appreciation, and leverage. It’s a multi dimensional asset class. And what drives me crazy. And Adam, I bet it drives you crazy to is that, you know, when you’re on YouTube, by the way, you get some just wacko comments. And like people that you can really tell sometimes, like, what are these people thinking? I know its present company excluded. But you know, you always get some comments. Oh, you’re crazy to be talking about real estate right now. Real estate is gonna crash, it’s gonna collapse, the economy is falling apart. That’s not completely false. But it’s mostly false. There’s, there’s some truth to it, for sure. I get it. You know, we do not live in a bubble here, folks. We know what’s going on in the world. I’m constantly reporting what’s going on in the world. But here’s the thing. Here’s the thing. It’s a multi dimensional asset class. And the culture of the entire world seems to be stuck in this one dimensional asset thinking, which is buy low, sell high. That’s it, buy low, sell high, folks. That’s only one part of our return on investment compilation here, right. It’s a multi dimensional asset class. And of course, we’ve talked about market timing, which is a fool’s errand a fool’s errand, Adam, go ahead.

Adam 3:54
Oh, those market timing makes most people do the one dimensional asset of buy high, sell below.

Jason Hartman 4:02
You’re right, that market timing usually does lead to that. But I want to even compare it to successful market timing, which is so rare, it is extremely, extremely rare. But even with successful market timing, it still doesn’t win the strategy of just buy good properties, and hold on for the long term. That’s the winning strategy. So anyway, this is just a reminder, that income property is of course the ideal investment. And remember that acronym ideal ID EA l income depreciation equity, growth, appreciation and leverage. And by the way, for those new to income property investing in the most historically proven asset class in the entire world. When I say depreciation, I mean that in a good way, right? It’s it’s good depreciation is the World’s Best tax benefit. It is a phantom write off. It is a non cash write off. It’s a tax benefit you get without writing a check to get good appreciation. Buddha depreciation. Yeah, Voodoo Voodoo depreciation. I like it. I like it. That’s good. All right. So let’s dive into Adams content here. And of course, welcome. If you have any questions, reach out to us through Jason If you’re in the United States watching or listening, call us at one 800 Hartman, and we can get you there, Adam. So here is a map. Now this is a photo. What are you? Are you reading the newspaper? I read? physical book. Can you believe this? I read a physical book. Yeah, a physical book. Okay, so a book on what is that? It’s that made of paper.

Adam 5:50
This is friend of the show, john Burns’s. The big shift that he gave out at the meet the Masters back I think two years ago, right. And I finally got around to actually reading it. No,

Jason Hartman 6:02
slacker, slacker.

Adam 6:04
It wasn’t on Kindle. It takes a while.

Jason Hartman 6:07
Oh, so So in other words, if it’s on, if it’s an E book on a Kindle or some other device, then you read it more quickly than you read a physical book.

Adam 6:16
Yeah, no, it’s probably true.

Jason Hartman 6:18
No, that’s why is that?

Adam 6:19
I don’t know, just ease of use? I guess I don’t know.

Jason Hartman 6:22
I don’t know. All right. So what does this tell us? What is this map photograph, this map of the United States as

Adam 6:31
one of the big things they were talking about is household growth. And you know, as people move, we know, we’ve talked about, and you’ve talked about on the show how people are still living with their parents moving back in with them. And when they go out, they form new households. They’re not new people, but they’re forming new households. So household growth is both people moving out for the first time and people moving out for the second time, and you know, divorces happening and creating new households. And this is showing where people have been forming households in terms of demographically where they’re moving. And if you look here, we actually have the southeast. And then Texas and Florida, throw everything off so much, they have to make their own category for them. Wow. Because the southeast, where we have a lot of our investment portfolios that we’re building for people that grew at 33%, as opposed to you know, your California was 21. If you look here, northeast, is only 13%. So everything’s growing because we’re getting more people. But if you look at the pace of growth, the southeast is growing at over, it looks like it’s about one and a quarter times faster, so 25% faster than the rest of the country. And Texas and Florida are nearly double the rest of the country. I mean, this is why when we talk about the cyclical markets, and the you know, the West Coast and the Northeast, when we talk about the hybrid markets and the linear markets, this southeast stuff, a lot of that is the linear markets and you’re still outgrowing the rest of the country. It’s incredible.

Jason Hartman 8:01
what’s what’s interesting about this is, you know that it’s just a sort of a broad takeaway from this map. And by the way, thank you for getting this together, because it’s really interesting. One of the broad takeaways would be that the money is it’s, you know, what I was saying 1617 years ago, the I call it the water theory of money, right? You know, you’ve got this water bottle. Yeah, yeah, pour it out. And what is the water do, right? The old saying is water seeks its own level. And, and so the water flows to the lowest point. And you know, this, this shows you that that’s happening, because these lower priced markets, the business friendly areas of the country, the right to work states, mostly where you don’t, you’re not forced at gunpoint to join a union. And if you want to get a job, the most ridiculous idea ever. That’s where the lion’s share of the growth is. Now, what’s interesting is that, like you said, Texas, and Florida get their own separate category. They’re not even regionalised they’re so big Texas for 47% household formation, growth. Florida, 45%, you’re in Texas, I’m in Florida. I used to live in the Socialist Republic of California at only 21%. So Texas, more than double Florida, more than double California. And these are more than triple what’s happening in the expensive Northeastern markets, all business mostly business unfriendly. So it really shows you just the general vibe, right? The vibe, how’s that for a technical term of what people are thinking and what they’re doing?

Adam 9:38
Yeah, now, the Southwest, we’re the fastest solid meant that. But for the most part, if you look at those states, those are states that don’t make sense at the moment. So it’d be great if we can get into the Southwest. But we just we can’t.

Jason Hartman 9:51
Yeah, and so what Adam means by that is that, you know, if you can’t get a good rent to value ratio on the properties, then we’re not going to be interested. is in those markets, you know, the Southwest is great. But again, it got too expensive. Many times over the years, we’ve been in and out of the Greater Phoenix metro area, because there were times when that market did make sense. And you could get a reasonable rent to value ratio. But again, most of those markets just don’t work. So you know, we got to go where it makes sense where the growth is. And this is really interesting. You did allude to divorce and I just want to talk about the D word for a moment. I’ve mentioned this over the years on the podcast, one of the things that I want you to consider now this is a little bit conspiratorial, I’m going to admit, but just think about it. If you have a country, right, and you want the economy to grow, or if you have a company, a major company, right, and you want to grab more market share, right for your consumer products. If you have a consumer, you add them, you know what I’m going to say? Because you’re chuckling at this, right? But it’s, it’s really true. You know, if you sell sofas, coffee makers, refrigerators, toasters, whatever, right? And, or if you’re a homebuilder, and you sell houses, and if you’re in government and say you’re the president of the country, or your Congress, or whatever, right? You’re your Congress person, dare I say, don’t say congressmen, say Congress person, thank you, PC here. You know, think about it. If you want the economy to increase in size, or if you want your market share to increase in size, you should discourage marriage. And you should encourage divorce, because think about it, when someone isn’t married, or if they are married in one household. And then they become divorced, you’ve literally doubled your demand for whatever your product is, right? If you sell toasters, now you got to have two toasters, because you have two households, you got to have two sofas, because you have two households, you’ve got to have two coffeemakers, cuz you got two households, whereas a husband and wife living in one household can just have one of those things, and they can both use them. So this is, this is literally double the market size, right? in an economy, where 70% of the economy is based on consumer consumption. 70% of the s&p 500 is just consumer, right? This is giant, it’s huge, you know, talk about a way to stimulate the economy, tell people to stay single, or tell him not, or tell him to get divorced. And this sucks. This is bad for society. It’s bad for culture. It’s bad in so many ways sociologically, but the powers that be the greedy powers that be the politicians that want things to look better on their watch, during their tenure, and the the big corporatocracy that wants to make more money, you have to admit that this would be a part of their strategy. Right? And so they want Hollywood to make divorce more acceptable. They want Hollywood to discourage the idea of marriage. And so you see all these movies that like suddenly reflect all of this stuff. And it’s just interesting, you know, because this is an increase in market share. For for companies. There’s just no question about it. Adam, you’re married, you got four kids comment?

Adam 13:38
Thanks for that happy, happy view of life and society. Right, right. Hey, listen, I’m

Jason Hartman 13:43
not here to make you happy. I’m here to make your money. By understanding the trends, you can make money. Yeah, hopefully happiness will result.

Adam 13:53
Now this chart is what has actually happened. This was 1990 to 2010. So this has already happened. If you go to the next slide, we’re gonna see what they’re expecting to happen. And this one is even better for us as investors. All right, you look at this, again, the southeast is actually going to outperform sexism, Borgia, and it’s going to grow at 24%. And they’re expecting household growth to grow. I think it was somewhere in like the 15 or 16%. Over the next 10 years. So this is their guests book at the time was written in 2015 for 2016 through 2025. So Texas is still growing 15%, Florida is at 12% and the southeast is at 24%. That is all higher than any other part of the nation. It’s our and on the left, we start breaking it down into areas, right, like we’ve talked about, you’ve got your urban, your suburban and your rural. And if you look what’s, what’s interesting, Adam here is I’ll bet ya you know when we look at the 2010 to 15, and the 2015 to 2000 As in 25, those are projections. Okay. So

Jason Hartman 15:03
well, you know, yeah, you can, you can lop a few percentage points for sure off of the urban growth, and just put that as into the suburban share of the market, I think, right?

Adam 15:17
Yeah. I mean, they were predicting it to go up to 21% urban, because people were moving. Older people who wanted to well, not older necessarily, but people empty nesters who wanted to move into where they’re more amenities, and then you’ve got the younger people moving out wanting to stay in the urban areas. But then as they get older, they start to move back out to the suburbs, you know, for they have kids and they move back out there. So they actually saw the urban dropping from 26, from 2015 to 2025. And that has definitely happened. So you’re looking at potentially 79% of the growth happening in suburbia. That’s where you’re able to make your work. That’s where we’re able to find properties is suburbia is growing. And this was before the pandemic, right, I would, right, you can even drop probably four to 5% off urban, because I don’t see many people move in there. I don’t hear me my friends talking about moving to the downtown core. But I’ve seen friends looking for properties in suburbia. Yeah, definitely.

Jason Hartman 16:21
So well. Now, no, just just to be a fair analyst and statistician on that, you know, you’re in the age group where there’s a lot of family formation. So your friends, if they’re single, they’re more likely to live in an urban area than if they’re married. Right? So you got to adjust for that a little bit. But I totally agree with you, my friends who are single and married. nobody’s talking about moving to New York City. Okay. nobody’s talking about that. nobody’s talking about moving to downtown LA or the more dense areas of LA or San Diego or Seattle or anything like that. And as I tried to post yesterday, but Facebook was censoring me, which is totally freaking ridiculous. You know, this, the social medias companies and their censorship is very bad news. And, you know, I posted that link from the Justice Department website about how they have literally declared New York, Portland and Seattle to be anarchy zones. In essence, right. So this is this is absolutely crazy. Yeah, and this is

Adam 17:31
completely anecdotal. But I think I don’t remember if I set it on a stream or a show before if I just said it talking to you. here in Austin. Whenever we moved here, the market was hot, people were going crazy trying to buy in the suburban area we are, and then it died down. And then just when the pandemic hit, I started getting text messages from my realtor saying, hey, if you see any coming soon Tell me because once they hit the MLS there, it’s gone. You know, they’re they’re snapped up. There’s so much competition. When you say if you see any coming soon, you’re talking about houses hitting the more houses for sale. But if there are any homes in your suburban neighborhood that are coming soon, let me know I have people who want to buy them right now. Yeah, yeah. And you know, what it reminded me of it reminded me of all the new construction that we’re selling that are aren’t even built yet, but people are lining up to get

Jason Hartman 18:17
Yeah, some of our clients are literally have purchased properties now, or signed up to purchase properties. That won’t be delivered until early 2021.

Adam 18:29
That’s me.

Jason Hartman 18:30
21. Yeah, right. Yeah. It’s just unbelievable. Yeah, it’s the demand is absolutely staggering. Now, I know. There are people out there who saying, you know, the end of the world is coming. But I don’t know. I don’t know that

Adam 18:44
it’s even at the end of the world. People need a place to live. Yeah, right.

Jason Hartman 18:47
They needed more. So when we discovered that during the pandemic, because people home became the center of the universe, as I said, so we got a couple Feel free to make some comments here, folks, we can get a couple questions, comments in. So good morning, Tony. Good morning gold color. Good morning, Robert. from Michigan. Yes. Tell us where you’re located, by the way. And we got to always ask Robert were on the hand. are you located you know, Michigan’s like a hand. Right? So you know, point there. That’s what that’s what Michiganders always do. Right? And then metal bump says, Hey there, good morning. Okay, so let’s go to the next slide, Adam.

Adam 19:22
Yeah. So this one is looking at mortgage rates versus home prices. And it’s no surprise to in home affordability, sorry. And it’s not going to come as a surprise to listeners of the show. Interest rates have dropped dramatically. And it lowers the payments, and it causes the home affordability to start going up. But then what happens is Jason home affordability goes up so everybody wants to buy. Yep.

Jason Hartman 19:49
So we have no supply.

Adam 19:52
I know this was also remember this was 2015. That first line down there. I don’t know if y’all can see it. The line where the blue lines are That’s 6%. We’re not at 6% anymore. Yeah, we’re at the bottom of this graph. We’re at 4%. Now, so. So as you were talking about people buy based on payments, not price. As it goes down, it’s showing you right here, as the payments get lower home affordability gets higher. And that’s even more important as this line goes lower and lower and closer to zero. So affordability is high.

Jason Hartman 20:25
Great point, Adam. And the word of caution here is the media deceives. You Oh, imagine that really? Nobody surprised that the media would deceive us, right? nobody trusts the media anymore. The mainstream media, or as Sarah Palin used to call it the lamestream Media. I love that, by the way, that’s good. But the lamestream media, this isn’t some big political conspiracy. It’s just that they have to talk in sound bites, because, you know, there’s a very short amount of time that they can talk and explain anything. And so, you know, what you see here is, virtually every discussion in the media and the mainstream media is home prices, you know, and they’ll show you a home price chart, you’d be looking at CNBC, they’ll put a chart on the screen, it’ll say, home prices are as high or higher now than they were at the prior peak. And look what happened, then there was a big crash, folks, that doesn’t make any sense. It doesn’t tell the story. Why, because of course, real estate is a multi dimensional asset class. And as Adam just explained, nobody buys a house based on the price. They buy it based on the payment. That is the true cost of the home ownership, the monthly cost, not the overall cost, folks, if everybody was so concerned about the overall costs, they would be wondering, you know why houses still aren’t $60,000 like they were decades ago, the interest rates are dramatically lower, and they’re buying based on that monthly payment. The other point of caution I want to give you is that, you know, people say, Oh, well, you know, the interest rate went from 6% to 3%. So it went down 3%. No, it did not go down 3%. It went down by 50%. Okay, so just when you when you look at these charts, realize, of course, that’s the comparison, it’s not a it’s not a 3% change, it’s a 50% change. Remember, the question is, as my followers have dubbed it, the Jason Hartman question compared to what, right, so you have to compare that old interest rate with the new interest rate. And you see there, you know, in that example, 50% reduction, so, yeah, Adam, that’s, that’s staggering. And, and by the way, I shared on one of the others, an example of a 2006. mortgage, if the interest rates then today buys you, that was $100,000 mortgage, and that example I gave before, I don’t have it on the screen right now. But now you can get $170,000 mortgage approximately, for the same monthly cost. That’s the issue, right, you’re getting $70,000, more 70% more buying power, for the same monthly payment. It’s truly incredible.

Adam 23:25
And so this next chart is as we’re talking about monthly payments, this is you know, people want to get their housing costs in that 30 to 40% range. So this is showing us as the and this is from July goes up to July of this year. And it shows you that as the interest rates have dropped, and this is when the interest rate has gone down to 2.98%, which is still hovering right around I heard that it went up to 2.87. Recently, and it shows that the home affordability is so great that your payment, the average payment is only 19.8% of income. Anybody pretty much anybody who can afford a down payment can afford a home right now.

Jason Hartman 24:11
Okay, now, Adam, this is good. And I want to make a comparison. I want to do compared to what on this one. Okay. I’m so glad you brought this chart. So great job. Let’s get out of my hand everybody. He’s got it. I wish that clapping would not go so long. You know, I need a sound effect machine with a shorter clap. Okay, but but Adam Adam wearing his rugby shirt. They’re just like you want a rugby match? Right? Not a game of match. Yep. Right. Yeah. See, I got the correct terminology. You’ve won the rugby match here on the affordability thing and here’s why. Okay. Think about the arbitrage. You know, I talk a lot about arbitrage and I like to give things simplistic definition So arbitrage, you know, the simplistic way to understand that important word is exploiting the differences in things. That’s what arbitrage is, you’re exploiting the differences in things. Okay? So think about this arbitrage. You buy a property, and that property is a 19% for the, you know, payment to income ratio. But when you rent a property, when you take that same property and rent it, I’ll bet you that your tenants are paying a 33 to 40%, rent to income ratio. Okay? That’s what the 3030 to 40% is typically what the renter is going to pay. And with that in mind, and this is not new for my regular followers, but I just got to say it again, because it’s so important. Look at folks. indentured servitude is illegal. Slavery is illegal. Okay, I hate this example. You hate this example. Okay, I think this example is a good one. But if you want indentured servitude, then all you need to do is buy a bunch of properties and get your tenants to agree, agree, their own free will, okay, they’re agreeing, they’re not forced to simply agree to share 30 to 40% of their total household income with you, every single month. So think about that. You know, a lot of people think, Okay, well, I want to go into business, I want to get rich in business, and I want to start a business. And one of the things you’re really doing in business is your arbitrage thing, right? So in a professional services firm, it’s an easy example to use accounting firm, law, firm, management consulting, firm, whatever, right? And so, typically, you’ll hire people, and you’ll pay them, you know, X amount of dollars per hour, say they’re professionals. And you know, just in this example, they make $50 an hour, that’s what you pay them. But when you build them out to a client, you charge the client $200 an hour. So you know, it’s literally a four times markup, right? That’s kind of pretty typical. Sometimes it’s even greater, I have one friend that works at a big tax and management consulting firm. And she gets billed out at insane rates, like hundreds and hundreds and hundreds of dollars an hour, almost $1,000 an hour, because she has this very specialized knowledge when it comes to tax nexuses and strategies for that, but she gets paid like a 10th of that. It’s crazy what they the arbitrage they get there, right. And so basically, what you’re doing is, is you’re saying to your tenant, okay? Instead of having an employee, your tenant is just going to work for 10 to 14 days of every month to pay you. That’s what goes to your rent 10 to 14 days of the first 10 to 14 days of every month that your tenant works is yours. That’s your rental income. So it’s pretty amazing. It really is. It really is and I sorry if you don’t like my example, but it’s just reality.

Adam 28:21
I prefer the indentured servitude is better than when you drop the slave.

Jason Hartman 28:25
Okay. All right. Well, listen, you know, there’s Look, there’s no secret. I mean, you know, many people have accused the Federal Reserve and the US government or all governments around the world and the big corporations, the corporatocracy of making everyone into a debt slave, you know, the student loan scam, which is a total fricking scam of epic proportions. It’s 1.5 trillion with a T. You know, it’s $1.5 trillion dollars or so, in student loan debt slavery, I call it the government, student loan debt slavery complex, it’s absolutely disgusting. You know, they’re selling these largely worthless degrees to not all of them stem degrees are very worthwhile, of course, but a lot of these degrees that they’re selling are a scam. This will be continued on the next episode.

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