The Ugly Truth About Today's Housing Market

Transcription

The transcription is auto-generated by a program and may not be accurate to the conversation. To ensure you get all the information from the video properly, you must watch the video.

​​​​Pete

Thank you so much for joining this week's podcast. I have Jordan Storment here. He works for Move Realty.

He's been a realtor here in Redding, California for about eight years. And if you are on the fence about maybe buying and you're not sure if it's the right time or if you're considering buying, this is a really good conversation that we had, it's going to be very balanced conversation of, you know, there's a lot of cons of buying right now and some pros, a lot of pros as well. So tune in, watch the episode.

If you haven't already subscribed, I would love it. If you subscribe, click like, and that would really help me out to get more information out and help, help the channel. Thank you so much.

See ya. What's up, Jordan? What's going on, man?

How are you? 

Jordan 

Not bad. 

Pete

Thanks for coming in. We met back, I want to say it was maybe mid 2000s, maybe celebration or. The stirring, stirring back in the day when we met in, uh, upon Twinview, when they were just a college group at Risen King. That's right.

Jordan 

That's right. Yeah. The good old days.

Pete

Yeah. So I've, I've known you for a very long time and you've been in real estate now. So you're a realtor, work for Move Realty and been a realtor for eight years.

You're also a real estate investor. And so I wanted to have you on our topic. Me and you were talking the other day and we got in this long discussion about really the transparency of the real estate industry as it relates to the information that consumers get from let's say NAR or mortgage professionals, or there can be a lot of bias out there.

So like, what can you believe about social media, stuff like that? 

Jordan 

Yeah. So, I mean, I would say right now is one of the most challenging times that I've experienced being in our industry.

And I don't mean financially. I mean, morally and ethically, this is one of the most unique markets that we've seen in history. And so navigating such a challenging market where there are so many challenges and so many difficulties between property, you know, homeowners insurance and interest rates, and then this NAR settlement and all these different challenges, and then economically on a macro perspective, and then just globally.

I'm like, the world is on fire. World War III is literally knocking on the door. The global economy is in shambles.

And then domestically, I mean, we're up against a lot of struggles with inflation and affordability and people are just struggling. And so, you know, I think being someone in our industry and trying to maintain our integrity. And what I mean by that is just what I say.

I mean, what I say and what I say is truthful. And it's what I actually believe. I feel that tension more than ever, because as we're trying to navigate this real estate world that we're trying to exist in, and there's so many things changing, it's really difficult as we navigate that because a lot of, you know, the opinions or things that we might be thinking goes directly against me selling a home.

So the advice or my thoughts on the market or the economy aren't the greatest sales pitch all the time right now. I think during COVID, it was easy to tell people like, buy a house. I'm like, good Lord, interest rates are under 3%.

It was back then. It's a no brainer. It is cheaper.

And usually it was like exponentially cheaper to own than rent. And interest rates were so low that man, it was, it was easier to sell that product to people because we believed in it. It's like, wow, that's a no brainer.

You want to own a home for less money than paying to rent? Sure. That makes sense.

But now it's like, that's flip-flopped. Yeah. It's a lot more expensive payment wise.

Sure. So monthly, you know, people are struggling and then mortgage payments in general between interest rates, homeowners insurance, and your principal balance and prices, their payments are much higher if they were to own than rent. So I think it's creating a lot more difficulty to, to really help people navigate this market.

Pete

Yeah. So what I heard you say is, and this is a big part of our conversation the other day, was being in the business and talking with maybe buyers and, or just someone that maybe wants to get into the real estate game or buy a piece of property. You have this conflict of wanting to provide for your family.

And this may be not just you, but it's every real estate professional, every mortgage lender out there. And we're talking about the industry in general. And we, we have something that we want to share here in a second, but what you're saying is that, you know, for the consumer, how do you decipher, you know, there is a lot of uncertainty because that's what we're talking about.

There's a lot of uncertainty, a lot of things going on that maybe it's not the right time for a family to purchase a home. 

Jordan

Yeah. And to be frank with people, and that's just my personality.

I don't know any other way. It is difficult when the reality of the situation, this is something that most people in our industry will never talk about. And that bothers me that we're not willing to have a transparent conversation.

That, you know, for us, our livelihood, like we're a hundred percent commissioned. Yeah. So we don't make a penny unless we have a sale.

So that naturally creates this pressure for people in our industry. It's like, my bills aren't going away. They're still coming.

I still have, you know, mortgage payments to pay and utilities to pay. And, you know, so we still have our own financial obligations, but then we're entering a market where sales volume is at historically low levels, the volume of sales. So that's less food on the table for people in our industry.

And that's putting pressure on people. This is something that's been really hard to watch is watching. And this is not everyone by any stretch of the imagination in our industry.

There's bad apples in every bunch. There really are. But there's really good ones.

So there are incredible realtors and lenders that are so incredibly honest and trustworthy and hardworking, and they deserve every penny that they get. But naturally, you know, we have hundreds and hundreds of realtors in this area. And so you can get some bad apples that might just be in a really.

Pete

Yeah. So I'm going to, I'm going to play that video that we talked about, because I think this will set a lot of light on our audience that are watching for them to understand what we're kind of talking about.

NAR Commerical 

When it comes to buying a home, family conditions often outweigh market conditions. If you purchase one of the millions of homes that will be sold this year, the National Association of Realtors wants you to know that you're making a good move for your family and towards building long-term wealth.

In fact, 60% of the average homeowner's wealth comes from their home's equity. Work with a realtor in your area. They'll help you find a home that's just right for you.

To learn more, visit housingmarket.com. Every market's different. Call a realtor today.

Pete

That video was created in 2007. Correct. That was right during the housing bubble, housing crash.

And so NAR was making this video and then over the next five years, real estate ended up going down about 40 to 50% nationwide. So like they're playing this video, you know, invest in real estate. And over the next five years, everyone lost 50% of the equity.

And so they would have had to wait, you know, maybe 20 years, 25 years before they got that money back, basically the equity back. So this is what you're talking about. And I think this sheds a lot of light about, you know, what's happening here.

Jordan

Correct. And so I eat, sleep, and breathe this stuff. I was doing a lot of deep dive digging on stats and just studying the market from back then and today, you know, just to be educated so I can help give people sound advice.

And as I was researching, I stumbled upon a couple of commercials that the National Association of Realtors was running in 2007 and 2008. And it was eerie and it was alarming to me because like I told you, when we talked about this, I'm like, it's the same script, different day. That's the kind of stuff that I think that I have been witnessing happen on a local level and a national level where we're in an environment where there is unprecedented risk that exists in our market.

And because of that, it's really hard to see people use these scripts. And let me give you a few examples. And these will sound familiar to our listeners because they're hearing them today.

You'll hear things like, it's always a good time to buy. I'm like, is it? Yeah.

Is it? I mean, I feel like there are certain times in history where it's irresponsible to say that. And 2006, 2007, that's a great example of when it would be irresponsible for someone to say, it's always a great time to buy.

But unfortunately, that's what salespeople are doing. Like even if the house is on fire, they're standing in front of it saying, everything's fine. This is a great time to buy.

The problem that I have with that is that I'm kind of lumped in with the bad apples. And unfortunately, realtors, lenders, people in our business, we're like ranked up there with used car salesmen as far as like consumer trust goes. And there's a reason.

And to me, I'm watching it unfold. I'm like, well, no wonder consumers don't really trust us because they've been burned. Because leading into one of the greatest economic collapses in history, you know, our National Association was running ads telling people it's the greatest time to buy and using, you know, certain things to try to pull on people's heartstrings to get them to make poor financial decisions.

And, you know, the same thing you hear today, you know, marry the house, date the house. I mean, using, you know, scripts like that to sell products when it's not really a product that makes sense for somebody. I've seen these messages and these scripts circulated and it's gotten to the point, I think, because the environment that we have economically is in so much turmoil.

I just feel like it's gotten to the point where I'm like, I feel like it's irresponsible for us to use those scripts right now. It's always a good time to buy. Housing always goes up.

I have heard people say that over and over and over again. And it is a script that people have to deal with an objection where someone's like, well, what if prices go down? And it's like a sales pitch to dismiss someone's legitimate concern about the market having a downturn.

So that's kind of where I wanted to like, hey, here here's the problem that I'm seeing in the dialogue that I'm seeing between lenders, realtors, people in our industry and consumers. Here's where I think we're going wrong. And then here's how maybe we can steer the conversation, maybe in just a more honest direction.

And again, you know, when you and I talked about this, I don't tell people like the market's going to crash next year. I know it for a fact, you know, book it because I don't know that. I don't know that for a fact.

And I'm not telling people don't buy a house. You're an idiot if you do, because for certain people's situations, it might make sense for them to buy a house. But across the board, I feel like there's a more responsible way that we can have a dialogue with people about the market in a way that I'm still able to maintain my integrity.

And I'm giving sound advice. And I really do see myself more or less as a salesperson, which is my official job title, which I hate, and more is almost like a financial advisor when it comes to buying assets, buying and selling assets of real estate. So, you know, conversations I've had with my clients in the last I'll just give you the last month.

So we have a mutual client that has been pre-approved with you. And him and I, he's one of those guys, man, he has been grappling with the market and prices and interest rates for like a year. I can't say his name, but you know who he is.

And we both have had many conversations with him. And, you know, I'm going out showing him homes and, you know, looking at different properties. And every time that I show him a house, like I've showed him probably two houses that he loved and wanted to buy had nothing to do with the house.

His reservation was 100 percent payment related, which, you know, is like the biggest hurdle for people to get over right now. So I show him a home. He likes the home.

Hey, let's, you know, revisit the conversation with Pete. Let's dig into the numbers a bit just to make sure you're confident before we move forward. Otherwise, there's no point writing an offer.

So we dig into the numbers and he gets numbers from you. And he's just I can see it and I can sense his anxiety and his stress. And he's just wrestling with it.

And he's like, man, I just you know, this payment, it's it's a lot for he's a single dad. It's a lot for a single dad. And, you know, it doesn't leave a lot of cushion.

And I get paid partially on commission. So if my sales go down, the economy slows down. Like you don't want to qualify based on the extra commission coming.

Absolutely. So he shares with me his legitimate concerns. And I told him this and I said, hey, I'm not one of those realtors.

When I hear your objection about payment, that's going to tell you no big deal, man. You're just going to, you know, just buy the house for now, marry the house, date the rate. You can swap out your rate, you know, next year for a 4 percent rate.

And then you're going to save a thousand dollars a month and everything's going to be great. I'm like, I just can't be that guy that says that. So I told him, hey, your concern is completely valid.

And I told him, just so you know, you're not the only person wrestling with these questions. And so I told him, I said, hey, here's the deal. If you are purchasing this investment, if you're buying a home for a short term, if you're if your perspective is short term, like thinking like everyone during COVID, like I'm going to buy a house as a starter home, then two years from now, I'm going to make a hundred grand in equity and I'm going to sell that home, buy a nicer home.

And I'm like, if that's what you think you're doing, I would strongly caution you to not buy a house right now if that's your mindset, because I'm like that is detached from reality. Like that market was honestly government induced insanity. I mean, yeah, artificially it was artificially created.

It's not real. So I'm like, if that's why you're buying a house, I would strongly caution you not to. But this is where I have a bigger zoom out, because if you zoom out, housing does always go up.

And that's where it's like people today, they're not straight up lying. Half truth is a whole lie. And so it's a partial truth.

It's a limited perspective. So telling someone housing always goes up to try to get them off the fence. 

Pete 

What do you mean by taking a bird's eye view?I think I have an idea for our listeners. What do you mean by taking the bird's eye view and real estate does go? 

Jordan

Totally. So I told him, zoom out. So don't look at the next two to three years. Don't look at the next three to five years.

Zoom out 20 years. And I'm like, housing does go up. And here's what I mean.

And I told him, I said, my parents, like our parents and grandparents generation, they did not buy homes to flip next year or to, you know, like, I'm going to buy this house to start a home in two years from now. I'm going to move up. No, our parents bought homes for the long haul.

It was a long term investment. They were buying a home to raise a family in, to put down roots, all these different things. But what's happened now, we've created this expectation where the last three, no, the last four to five years, people have been buying and selling homes, trading them like stocks.

It literally is like, I'm going to swap this one for that one. I'm going to cash in 50k, put that and roll that down on this one, buy another one. I'm like, this is insane.

And it's not sustainable. So I told him, I said, listen, if you zoom out, housing does go up. So if you zoom out, my parents are one of the few people on earth that bought a home in 2005 and didn't just let it go because it lost 50 percent value.

They are strong Christian people, have strong moral values. So my dad told me I made a commitment to that loan. I still have my job.

I still make the same amount of money. I can pay it. So I'm going to pay it.

Pete

He bought in 2005. 

Jordan

Yep. And within the last like four years of the first time that he actually had like positive equity from where he bought it, since when he bought it.

And so, again, look at that. Bought in 2005. Here we are 20, less than 20 years later.

And even in one of the great financial crisis, it's still rebounded. And he's above where he was when he bought. But that's a 20 year lens, not a three year lens, not a five year lens.

Pete

Yeah. And I think I agree with you 100 percent. What I show people that crash in 2008 was the only crash we've actually seen.

But all the way back to 1940, it's like 80 something years. That was the only big crash that we had. We had in the 90s, 1990 and 1991, real estate went down one percent in 1990 and point one percent in 1991.

Now, like what you're saying, this is according to Case-Shiller housing index. Yeah. And so Case-Shiller, they track it every.

In fact, yesterday they just came out and said year over year, we're up about five percent for Case-Shiller from last year, year over year. Anyways, my point is that there's been one big crash. And I like to educate people on why that crash happened.

Jordan

Yeah.

Pete

And I think for most of the audience that me and you are talking about are first time buyers. Would you agree? Sure.

Because, I mean, someone that has to move, they have to sell their house. They got a job relocation. They're going to buy.

They're not necessarily going to rent because they can put a big chunk down. Everything's fine. But first time homebuyers are renting for fifteen hundred and they're considering buying for three thousand a month.

This is what we're talking about. So does that actually make sense? And so there's times where I'm thinking to myself with someone buying, you know, they can afford it.

Their payment's there. You know, they have enough room. But at the same time, it's it's a big difference for the first time buyers, you know.

And I don't know that that gap's ever been as much as it is today. It's it's tough. And I can see your point.

It's tough on navigating that for first time homebuyers. 

Jordan

I think it's difficult watching the dialogue about real estate amongst my peers, meaning professionals in our industry, because that's where I'm seeing a lack of transparency and a lack of honesty and sound advice. And you're just hearing the scripts to the objections.

And that to me, I think I just think it's because of the time that we're in. Because, again, I mean, most smart economists or anyone that knows anything about the economy, it's there are so many alarms going off at the same time, like during COVID. Like you and I have talked about this.

We could nerd out on it all day long. But there is there are so many historical indicators that are pointing towards a potential recession. Obviously, that could impact the housing market.

So for me, it's it's not about saying a recession is going to happen or it's not. It's more for me as a professional, I feel like because of the amount of evidence supporting a possible recession is so significant that for me, I'm like it's irresponsible for me to not acknowledge that, to not to not at least in my dialogue to have a balanced perspective of like, yeah, you know, this is a possibility in this because these are the questions I get. Like I've been an escrow with a client that you're doing the loan for and the guy straight up asked me, what do you think this home is going to be worth in two years?

And I'm like, I really hesitate to answer that question. And I told him and I had an honest conversation with him. I said there's possibility that it could be worth a little bit more.

There's also a possibility it could be worth less. And I'm like, anyone that tells you there's not is kind of lying because how could they say that? 

Pete

So I'm not saying, hey, for sure, the housing market's going to crash and, you know, but it's and there's and there's also pockets, neighborhoods where you have, you know, this one comp that all of a sudden they had to fire sale the house and it brought down the value for a short time.

And then, you know, so there's like a lot of different intricacies of real estate. It's not like necessarily the stock market where you see the price and I'm going to sell at that price. You know, it's like I have a commercial building down in Red Bluff and I bought it a few years ago.

I remodeled it and it's been on the market now for six months trying to sell it and no bites at all. And I'm like quite surprised. Excellent location.

I bought it in 2020. We remodeled it and it's sitting on the market for six ish months. And I'm like, why is there no one?

You know what? And so I don't think that the value is not at what I'm trying to sell it for. I think that it's close to where it is.

It's just there's not buyers. So like people have to understand a real estate is not liquid. It's not it's not like a liquid investment or you buy and sell like what you're saying.

Yeah, it's like this is a home for your family. And be responsible personally, responsible for this home. You know, make sure that you can afford it.

And any of your clients that are working with you, that they're very, very lucky because they're going to get the honest truth about, hey, make sure you can afford this home. 

Jordan

Yeah, definitely. And I mean, you're you're in the lending world, so you see it more than I do.

But our country has a debt problem. People have a spending problem. I mean, it's it's pretty obvious.

And so, you know, walking into someone getting helping someone walk into getting in over their head, setting themselves up for some financial trouble. I'm like, it just doesn't sit well for me, you know, so for me to not at least caution someone and give them sound advice and like, hey, maybe don't max out your DTI just because you qualify for that certain amount doesn't mean that you should max that out and strap yourself in every month. You have no breathing room and your house poor like that's not a good feeling because those are the people that let's say we did lose even like one, two, three, four percent value in the housing market.

Those are the people who are in trouble. 

Pete

Let's say the home does go down. Yeah, two, three percent.

That's happened even in the last 10 years. Real estate consistently has gone up. Yeah, but from a six month period, a six month period, you could have one or two percent decline in your home before it comes back around because the value of one particular house is not based on, you know, this overall, this is what your home is worth.

It's other homes that have sold in the neighborhood. And so you could have bought a house. It goes down two percent.

But then all of a sudden these three homes sell for a little higher. And then all of a sudden you jump back up. It's not like I'm going to pick this date in two years.

It's going to be worth this. No, that's not really the right question to be asking as a first time homebuyer. The right question is, can I afford this payment?

And do I see my income increasing, staying the same or going down? Because if you're a first time homebuyer and you're looking at this payment, if it's a comfortable payment for you and you know consistently that your job is going to consistently rise in income, because wage inflation is true to our incomes, I mean, obviously we could get laid off or whatever. But overall, if they think their income is going to rise on a consistent basis year over year, that mortgage payment, if it's comfortable now, it's just going to get easier and easier and easier, you know?

So I think that's the right question for buyers. It's not, hey, what's this home going to be worth in two years? Well, if I knew that question, I'd be a multi-trillionaire.

Jordan

That's what I told them. Yeah. I'm like, man, if I knew that for sure, if I knew for certain that asset was going to appreciate in two years, why wouldn't everyone buy it?

We'd all be flocking to it, buying it. That's the reality, too. I've had people beg.

Well, I had this person, this realtor, this lender said this about my house. I'm like, if that was true, they'd be buying it. I had a lender.

I was in I was an escrow with a client and my client called me and shared this with me. And I talked to this lender. And again, the client was struggling with payment and he was really he was conservative, which I appreciate.

He's like, you know, I just don't want to put my family in a bad place. And I'm like, I respect that. I'm not going to push you through that objection.

I'm going to like validate that's a valid concern. I'm not going to dismiss it. And so we were talking and his his lender, I mean, I think he just wanted him to buy the house.

So he called him and told them this is a quote. He told me this. The lender said this to me directly.

He's like, oh, he's just being ridiculous. He should just buy the house in a couple of years. I'll have forty thousand dollars equity and then he can go on and do this.

And then he's just going to refi and then and just went on and on. And I literally sat there thinking to myself like, what? Internally, I was thinking, I cannot believe you just said that to him.

And then my client called me and regurgitated basically what the lender just told me. He's like, well, I talked to my lender. He said, yada, yada, yada.

I literally had to be like, I'm not really in that camp. That's his perspective. And that'd be great.

I want that for you. But I knew I'm like, I cannot walk this person to close escrow knowing that I created this false expectation that's not based in reality or facts or data, anything in the market right now, even though that narrative will serve me, which that's the truth. And that's what's so hard is it's so obvious that it's like we're salespeople.

We're spinning a narrative that serves us. And for me, I'm like, that's never going to be me. I can't do it.

I can't sell a product that I based on false pretense. And so I had to walk him through like I told him that could happen. I'm not saying it's impossible for that to happen, but I am telling you, if you are buying this house because of the expectation that that is going to happen, that's not the right reason to buy this house.

Totally. And that's that's the stuff like boots on the ground that I am watching happen. And to me, I'm like, I think that's why consumer trust with people in our industry is at an all time low.

I look locally at content created by people in our industry and nationally. And I'm not kidding you. I do this for fun sometimes.

I will look at influential podcasters or video, you know, realtors that create content that have millions of followers or hundreds. There is a consistent response that I'm seeing across the board from consumers. Realtors, lenders create this content trying to incentivize consumers to buy, but they're doing it in not a balanced narrative.

It's just a one slanted. It's always a good time to buy. Housing always goes up.

It's the scripts. I read through the comments, almost every one of them. That's from a consumer, not another realtor or lender that's like champion high fiving their co-worker, but like actually from consumers.

It's embarrassing reading the comments. People are like, oh, wow, another realtor saying it's the best time to buy. How do we differentiate ourselves from that?

Because I love my job. I love what I do. I love selling homes.

I love guiding people through buying and selling a home. I love helping people buy the greatest, most expensive asset of their life, especially when I help them win. When it's like, dude, I'm helping you build wealth.

I'm not the guy who walked you off a cliff and put you in a terrible financial situation that ruined your family for a decade. I'm giving you sound advice. So you hear that kind of stuff.

And it's just like, man, no wonder consumers like see content from realtors and they rolled their eyes and they're like, here's another realtor making a TikTok reel, telling us to buy homes when in the back of their mind, they're all talking about what we're not willing to talk about. Well, what about the negative jobs numbers report we got? What about this?

What about that? And then realtors are just like, forget about that. That doesn't mean anything.

I'm like, it does. I'm like, there's enough evidence. That's why I'm like, it almost takes our credibility away when we are dismissive of undeniable concerns.

And that's where I'm like, I don't want to be that guy. I'm not the guy saying doom and gloom, the market's going to crash. But I'm like, how can we be in the middle giving sound advice and really having a balanced perspective and not putting our own bottom line ahead of our fiduciary responsibility to our clients?

I think that's my real struggle. And I get it. Realtors, lenders, we have to put food on the table.

We have families to take care of. But at the end of the day, I can't say something I don't actually mean just to try to close a deal. So I get paid today.

People who have been in this business long enough, like you said, you've been in a long time. I haven't been in as long as you have, but I bought my first home in 2010. I bought other homes and, you know, I love real estate and I'm like, man, I, if you've been through it and you've seen kind of both sides.

Pete

I was in the business in 2007, 2008. I got in the business in 2003. I ended up buying real estate because of home values just are supposed to always go up.

I was that guy. Yep. I bought multiple, multiple properties.

And I remember sitting in the living room at my parents' house, I was over there visiting and I was just kind of watching the news and I was like, wait a second. At the time I had had a fourplex in Baton Rouge, Louisiana, had a duplex in Baton Rouge. I went to- 

Jordan

I remember this. Didn't you buy something in Spain? 

Pete

Yeah. So that's another story. So I went to a conference and it was a Donald Trump conference and it was Donald Trump and Robert Kiyosaki and, and all of this. And it was in 2005.

And so it was like, yeah, it was like this real estate conference, there was expo's. Anyways, I ended up from that conference, I ended up borrowing more money on another house that I owned. Use that line of credit to buy a hundred percent financing on a fourplex and a duplex in Baton Rouge, Louisiana.

And then I ended up buying a property in Idaho. I had like five or six properties, all that were like leveraged to the hundred, max. Which people are still doing.

And so the, what happened was the income producing from those, you know, was barely covering all of the payments. So you know, I had Hurricane Katrina came through, took up my roofs off of those two places. So all my tenants left.

The insurance company- I didn't know this part.

Jordan

Yeah.

Pete

The insurance company took eight or nine months to get paid. And so I didn't have payments for my rent. I had this mortgage.

And anyways, it was a mess. Yeah. I ended up going through that with that mindset and got complete crushed from the market when it crashed.

And, you know, I came all the way through it. I learned one thing with real estate, I learned multiple things, but the number one thing that I learned was you don't buy real estate because of home values going up. That's just like the cherry on top.

You buy a primary residence, you know, when you can afford it and you can have that monthly payment and it's affordable and it's something for you and your family, you know, I'm willing to spend a premium to have a house instead of an apartment. Sure. You know.

And so I learned that. And the other thing I learned is I don't buy any investment properties. I don't leverage.

So I'm going to make sure I have enough equity. Right. And then also it's got a completely cash flow more and I'm not just going to buy it based on the appreciation.

That's what I did. So- Because if it's cash flow, you don't need to sell.

Jordan

Right.

Pete

And that's a hard thing with people. Like you said, the $3,000 mortgage versus the $1,500 rent. So you literally have people faced with the conundrum.

Do I buy a house with a $3,000 mortgage that I can rent for $1,500? Robert Kiyosaki says that's a liability. 

Jordan

Yeah, because then what if something happens?

What if you do need to relocate for a job? What if you get divorced and you have to sell that house? Then all of a sudden, it's like, we can't hang on to this asset because it's not cash flowing.

It has so much negative cash flow. We can't float it. And that's why I'm so sensitive when I see people in that situation.

That's why I'm not standing next to them, shoving the gas pedal down saying, just buy it. Don't think about it. Just buy it.

You know, like that. Because to me, I'm like, I literally stress about that for them. I've had people that bought a home in 2021 that have a less than 3% like interest rate that have called me in the last six months because something happened that they might need to sell.

They can't. They can't without paying money to sell. And I'm like, that's a tough situation to be in.

Pete

And that's for people that have a situation that came up where they have to sell, a divorce or maybe lost a job or something like this. And it happens. You know, I have a client right now that they're contemplating selling or, you know, trying to get the home because it's like a divorce situation and they bought last year.

And so there's not enough equity to sell. Yeah. But one of them wants to keep the house and is contemplating keeping that payment.

And on the refinance, you've got to come in with a little money, you know, but that that definitely happens. And, you know, it's risk. I think a lot of buyers need to know what the risk is.

I know what the risk is when I buy Apple stock. Yeah. You know, the risk is, you know, the stock could go down, you know, long term, you know, they're going to do great.

It's a great company. Totally. Consistently, you know, but tomorrow it could have some kind of scare.

They, you know, lower interest rates or something and creates inflation and people are going to sell off. Having a home, investing in a home is a very long term situation. It's not a, you know, can I buy this and then sell it next year?

Jordan

You know, don't do that. Yeah. And that there's always going to be risk in every market.

And so for me, it's, it's more of, but my, my clients are going to be aware of the risk. Yeah. I'm not going to like try to blindfold them through and be like, don't look at that.

Don't look at your insurance premiums now because it's quadrupled. There's risk, you know, and I think as long as we're walking people with eyes wide open. 

Pete

So what are your, what are your thoughts on long term in general with, you know, we got the election coming up.

What do you think that will do to a real estate and then be the overall economy, depending on, I don't want to get too political, but I mean, you know, it's important discussion, I think. 

Jordan

Luckily, I don't think this will be political because I truly don't think it matters who gets elected as far as the economics of it. Because no matter who wins the election at the end of the day, once the dust settles, we still have the exact same problems that we had before the election.

So there could be some short term, especially in the stock market, because that's bizarre. That'll bounce around like a pinball. But long term, like as far as looking into 2025, and this is the hard questions that are difficult for me because my answer is not a good sales pitch.

Pete

Do you think that we could have a slowdown in real estate? 

Jordan

Yes. 

Pete

And how much of a slowdown would you say?

Jordan

Honestly, I mean, if you look at where demand has been, even with rates coming down, again, when you're a lender, you see demand hit when the Fed starts manipulating rates. So I think buyer demand is historically at like an all time low because of a lot of different factors because even just I bump into people all the time in my neighborhood, and I live in an affluent neighborhood, and my neighbors are strapped for money. And this is a nicer, definitely above average neighborhood.

And they're all, it's like the same message. It's like inflation is squeezing everybody. I bumped into a mutual past client, I wish I could use names, because you're like, oh, my gosh, I just found out that they're pregnant with twins, crazy.

And I was like, oh, my gosh. And we were talking about that. And you could see she's like super excited, but also deer in the headlights, terrified, because kids cost money.

And I'm like, well, how you guys are doing? You guys are going to do great. And she's like, yeah, just, and they both have great jobs, same jobs that we sold in the house.

And they're in a great house with a great payment. But she's scared. She's like, man, we're a two income family, and we're still struggling in this economy.

Like everything is so expensive. So here's the one thing I haven't heard an intelligent response to from anybody. What do you do with the affordability issue that is crippling everybody outside of top earners who don't care because it doesn't matter to them, but your average middle class Americans that are struggling?

And I'm like, what's the solution for that? And this is the interesting conversation you and I both talked about. I'm like, what's the solution for that?

There's a few potential things that could happen. The government can lower rates to try to stimulate the economy again. And I think they will continue to do that.

But here's the hard thing. The Fed is walking a tightrope right now to where they're teetering to where if they offer too much like quantitative easing and they let up on the economy and they lower rates and they try to stimulate, then they can heat up inflation again. And we all know, we all know like two to three percent inflation is normal and healthy and we budget that in.

But what do you do when assets, housing and beyond appreciated in some areas? It's different because real estate's regional 30, 40, 50 plus percent in two years. 

Pete

I think the Fed has always been behind. I mean, in 2021, when they artificially brought rates down by buying mortgage backed securities, they were doing that. Plus, that's the quantitative easing that you're talking about. And then obviously, they brought rates down, the short term rates down to almost zero percent.

So when they were doing that, oh, no, this won't create any inflation. We have deflation right now. So this is like, you know, and they were in that stance for like over a year.

And at the same time, you saw that there's a lag. And that lag is in the reports like CPI and these inflation reports. They do averages.

So like one of those is rent. So it's a 12 month average rent. It's owner's equivalent rent, which basically means they say, hey, if you were to rent your house out, how much would you rent your home for?

Like, that's a number. They also track leases. And so the leases is a 12 month average.

When you lease a home, that's good for the next year. And so leases aren't going to change. So it's a big curve coming down, because when you when you lease, I point to this is they're tracking in the rearview mirror and they need to look forward, looking in the rearview mirror.

And so they're way behind the curve during COVID. And I think they're behind the curve right now. I think that they went too far by raising rates, you know, and keeping them here.

And the Fed just came out and said yesterday, said, oh, we think the inflation is going to be too low. Like there was a Fed member that was talking is inflation is going to be too low. We need to cut massively is what they were saying.

So like when we're talking about the Fed, I don't think that they really I mean, yes, they're in position. And who am I that I know more than what they do? But with my two cents, I don't think they really know.

You know, I don't think they they have it right now. 

Jordan

And the hard thing is with the Fed, and this is not an insult to them, it just is what it is. It's the same thing. I listened to a podcast with a top CEO of a bank, and he came out right out and just said how banking works. He's like, I mean, and he was talking about the couple of banks that failed, Silicon Valley Bank a couple of years ago now. And he was talking about basically bad news, bad press.

If someone comes out and says there's an issue, it's a self-fulfilling prophecy for banks and the economy. 

Pete

Yeah, it's trust. 

Jordan

So he's like, literally, they will stand in front of a burning down house and tell you everything's OK, because if they don't, they have to.

Yeah. So it's like this is all predicated on we know that we're being lied to and we know they have to lie. So like if we're waiting for the Fed to come out and say, hey, guys, just, you know, we're in trouble and there's a recession around the corner.

It's a self-fulfilling prophecy. If Jerome Powell said that it happened tomorrow. So he comes out and says everything's great.

We have a great economy. I'm like, then why did you lower rates 50 basis points? You don't lower rates unless you're trying to stimulate.

And why would you? Yeah. If the economy is so great, why do you need to stimulate it?

It doesn't make sense. You're saying one thing and doing another. 

Pete

Unemployment jumped, jumped up from, you know, it's low 3.4 to like 4.2 or whatever.

Jordan

Yeah. And their jobs numbers mysteriously get corrected. Eight hundred and eighty thousand jobs. Wow. And we're creating government jobs. That's not that's not.

Pete

Yeah. So to kind of bring it back full circle, the big picture, I truly believe that it's a week to week paycheck for the entire world, like that we're a week away from absolute disaster. Yeah. On any on any kind of level.

And that difference in that week is the trust and the trust in the financial market. Yeah. You know, saying that this dollar and I have a dollar is worth a dollar.

I think that's where we're at. 

Jordan

Like the Fed. Literally, if people don't know, they they did not admit we were in a recession in 08 until a year and a half after. Yeah. Yeah. And that's what they have to do.

Yeah. So, I mean, it is what it is. They're going to come out and, you know, give us some good news because they don't want people to freak out and panic.

Pete

And they like massively drop rates. And they did that, you know, and started quantitative easing way before they said they're in a recession. 

Jordan 

I'll give people an interesting statistic. And I found this fascinating when I discovered this and it was pulled up on a screen like to the day in 2007, the Fed lowered rates 50 basis points in September and the stock market rallied 11 percent, went up 11 percent over a six week run, and then it plummeted 54 plus percent to the stock market. Yes. So, I mean, the Fed telling us everything is OK, but lowering rates doesn't make sense.

They wouldn't lower rates if everything was OK, because that wouldn't make any sense. So but I think for me, especially just to bring it full circle with real estate again, I love my career. I absolutely 100 percent believe in housing.

I believe in owning real estate. I think at the end of the day, it's always been one of the greatest ways to build wealth. But I do think there are key times in history. And I just listened to a bunch of very rich people this morning that were like, dude, we made our fortunes in 2008, 9, 10.

Jordan

Yeah.

Pete

Down markets. Yeah, totally.

Jordan

Yeah. So real estate is one of the greatest investing tools you can have and just owning real estate over the long haul. And I believe in that. And at the end of the day, if you're holding real estate 30 years from now, you win.

But there are windows in history where I think the narrative of that gets circulated by salespeople of housing always goes up, marry the house, date the rate, yada yada, just the same BS. I think there are certain points in history where it gets like, OK, that's irresponsible to say that now. I mean, tell that to anyone who bought in 06, 07.

Would you love to go back? No, they wouldn't. There is not always a great time to buy.

Sometimes there are windows in history where it's great times to buy. 

Pete

It's also great location to buy. Totally.

You know, that plays a huge part into it. You could have a neighborhood that's just terrible. You know, don't pay a premium for that.

Totally get a discount for that neighborhood or whatever. Yeah. So it's not just the timing, but also where the type of house and that's where having a super solid realtor like yourself.

Jordan

Absolutely. And even now, things you don't see in the bottom line of the sales price. You know, three years ago, people were buying homes and waiving inspection contingencies.

They weren't even allowed to get an inspection, let alone ask for any repairs. And I'm like now like interest rates aren't as good. But I'm like I negotiated like forty thousand dollars of repairs on a property.

We got two new AC units because it's a larger home. I mean, literally an insane amount of concessions so that this client moved into a house that if they would have bought that during COVID, they wouldn't have gotten anything done. And now all of a sudden they're getting leverage to negotiate price credits, repairs.

So and again, if you zoom out, they got a new roof, new AC unit. Those are all things that are going to come up over time. And it's why people it's so important for people not to buy homes and be house poor because like what if your roof needs to be replaced in five years and your AC unit goes out and all these different things that we're seeing, people are so strapped in.

They're like, I can't even afford to fix my hot water heater because it costs eight hundred bucks and I don't have eight hundred extra dollars every month. I think just in general, I'm like, I believe in housing. I invest in housing. I believe in it. Am I buying real estate now? No.

And so to me, I'm like, it would be disingenuine of me to get on a soapbox and tell people it's the greatest time to buy in history. And you're an idiot if you don't. And you're going to have forty thousand dollars equity and all this nonsense.

When I'm like, if I really believe that, put your money where your mouth is. I'm like, we're real estate professionals. You're in real estate.

We have a pulse of the market. 

Pete

Yeah, I actually, I actually just bought a house just a few months ago. Nice.

Yeah. But it's investment property.

Jordan

Yeah.

Pete

You know, it's a good deal. I got a good price on it. There you go.

So things, you know, the price, it's the how you buy it, why you buy it. Hundred percent. Yeah.

Hundred percent. 

Jordan

So, yeah, definitely interesting times. But I think in the long run, it's like real estate comes out on top.

Pete

Yeah. So if a buyer wants to get a hold of you. Yeah.

How do they get a hold of you? Yeah. I mean, on Facebook, Instagram, the usuals, call, text.

Yeah. I mean, we can put my contact info wherever. And again, this is why I enjoy working with you.

And I tell people that we work with mutually. I'm like, Pete is kind of like a mortgage advisor. He's going to throw up on a screen multiple different options.

And this is what this looks like. And if you put this down that and really serving the options. Yeah.

But also you're not shoving loans down people's throat and telling them they should get payments that make no sense or anything like that. Like we're navigating this market and giving sound advice to people and, you know, weighing their options. So, you know, I definitely think for me, that's the same thing I do with people.

I really do see myself as a real estate advisor that I give financial advice. That's real estate related. But I know a lot of realtors almost.

I've had this conversation with many realtors, and I think they don't want to even carry the responsibility of that. So there's like, no, it's not really my job. I just you know, someone wants to buy a house, sell a house.

I help them do it. I don't think much beyond that. And I think it's because they don't really want to carry the responsibility of what happens after that for people.

But for me, I do, because I'm like, these are my friends, my family, even strangers that I've sold houses to are friends now. So I'm like, for me, I'm not going to burn one of my family members, giving them advice that I don't believe in. So just sitting down with people and saying, what is what are your needs?

What's going on in your life that might, you know, make sense for you to buy or sell a property? And we dig in and and talk about it. And sometimes the conclusion and that one person I brought up that was struggling for a year is still struggling.

And the last conversation we had this week, he's like, I might need to like pause and like wait. And, you know, instead of me like pushing through, like trying to get him off the fence, I told him like, man, you can here's your options. If you wait, here's the pros and cons of waiting.

If you buy now, here's the pros and potential cons of that. Here's what could happen. And so now you get to make an informed decision.

I didn't withhold information from you. I gave you all of my expertise and knowledge and insight on the market and the economy, and then you can make an informed decision. So that at the end of the day, you know, that's a decision they made.

You know, not I gave them a totally slanted perspective. I withheld a lot of information about the market and my own insight. And just trying to make this sale, you know, and to me, I think that's the stuff that kind of irks me a little bit because I love my career, but I don't want to get lumped in and associated with that kind of stuff.

But I want to do this the right way. And I'm like, how do we hold our head high, walking people through real estate during one of the most difficult times in history? Yeah.

But came out the other side being like, you know what? I did people right. I I really did this to the best of my ability and kept my integrity throughout the process.

Pete

Yeah, I 100 percent agree. And I appreciate the honesty. I love the conversation.

I think it's a conversation that needs to happen for buyers to really understand that not just the pros, but also the cons.

Jordan

Yeah.

Pete

Understanding those cons. Yeah. Cool.

Well, thank you very much, Joe. I really appreciate it, man. Yeah.

Jordan

Yeah. We'll still be here, you know, grinding away because like for those of you who've been around, it's I'm like real estate. It's it's not always a perfect trajectory upward.

I'm like, we know ebbs and flows and ups and downs happen in this market. And I've financially prepared myself that like, you know what? I don't have to abandon, you know, my fiduciary responsibility to my client to try to make a sale because I need to pay my bills this month.

I'm like, I'm going to be selling homes in a few years, no matter what. Like I've prepared for that. And so I'm thankful that it allows me to really keep my integrity and give sound advice and see the bigger picture.

Because I've told you this and I really believe this. And this is just kind of my moral compass is if I do this with honesty, integrity. I really believe that whatever things, if I give someone an honest evaluation of the market and I share data and facts and information and if their conclusion is I'm going to wait to me, I really believe and I trust that that business will come back around.

And then some if I do things the right way. So for me, I'm like, if I kill a sale today, being honest, so be it. I think it'll probably be three more sales if rates do come down and things become more favorable and make a little bit more sense.

Like back in the day, we're like, man, this is just easy to sell a house. Everyone wants to sell and buy. This is great.

So when we enter those again, I think people will gravitate back to the people and places that they identified as safe and people they can trust through that. Not the people who are just shouting the scripts from the rooftop, but like, dude, Jordan was a sound and trustworthy resource during this time. He wasn't just trying to make a sale.

He was considering me and my family. He really cares. And for me, I'm like long term.

I think that will yield much more than just, hey, I closed one more deal in 2024 because I told someone something that wasn't really the best advice, you know. 

Pete

Cool. Thank you.

Jordan

Thanks for having me on. 

Pete

Yeah. Thanks, Jordan. Appreciate it, man.