September 20, 2023 • 22 mins
It is a different mentality, look at your home as an asset that builds value over time!
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Episode Transcript
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(00:00):
Rob, what's up man? It's been a while since we've been able to do one of these.
(00:25):
I know we said we're going to try to do them at least once a month and are we at that pace?
No, something always comes up. I mean, you know, life happens. We've been really busy lately,
as you know, just turning and burning them with the buyers trying to get them into houses. It's
(00:47):
been fun. Yeah, no, it's great. It's great to see the activity on the market pick up. That is for
sure a positive development. Yeah, so we've noticed a lot of interesting things happen in the market.
What's that? What are you noticing? Noticing, you know, it's just become really a different
(01:11):
competition for buyers this season. You know, last couple, three years, it's been all
a barry of money coming up our way, cash. Right. So there's no competing with a 10-day deal, you
know, over asking. We're noticing a lot of different loans being able to compete. And
(01:39):
it's just been interesting seeing a normalized market again.
Yeah, that is true. And you use the word normalized market. And I don't want to use
the word normal because it doesn't seem normal yet. But it is at least a new normal. There is a,
and I know that phrase has been used multiple times before, but it is. We're in a completely
(02:01):
different environment, Matt. If you look at, you know, what's going on with the interest rates,
because there's probably one of the top questions I get asked of all the time, are the interest rates
going to go up or going to go down? And my answer is always, well, first of all, I do not have a
crystal ball. And I am not, you know, even the most advanced economists with fantastic models are
(02:25):
often wrong, right? So I always caveat with that. But what we have noticed in the last
six months is that the interest rates are not going down. They seem to have at least
gotten to a peak that makes all everybody risk averse and everybody shy away, which is the
(02:47):
7%. Anything close to 7 or above 7 makes everybody go like, oh, my gosh, what's going on, right?
And you're shy away from it and step out of the market. So it seems to me that with all the changes
that the Fed has implemented, all the increases in rates, it seems to be stabilizing around that
6% to 7% mark tends to be in that middle range between 6.6 and a half. Will it go down further?
(03:17):
I don't think so. I mean, if you look at the big environment, that if you look at the macro
environment, right, like, unfortunately, inflation is still high. It hasn't, it has improved a little
bit, but it hasn't dramatically gone down. Our GDP is expected to be close to zero in the next
(03:42):
few months. And people are still spending money. So it just doesn't make quite sense. The amount
of money that people are spending doesn't commiserate with the fact that the wages are increasing,
but not as fast. So inflation is here to stay, at least for the next few months, at least, I mean,
(04:06):
we're May, I don't see the interest rates having a significant change for the next few months and
even maybe all the way to the end of the year. So I may be wrong, but that's what it seems like. So
I always tell people, people always ask me the following question. Once I don't give them an
exact answer about where the interest rates are going, they always ask me the next question, which
is, is this a good time to buy? And that's such a personal question, Matt. Yeah, that is a personal
(04:34):
question. Like, well, is it, is it a good time for you to buy? Do you have a stable job? Do you feel
your income is not going anywhere? Or are you at risk of losing your job? If you are at risk of losing
your job in the next year or two years, it's not a good time to buy. If you feel stable where you
are, if your industry is stable, if your family is stable, if you have the finances to sustain a
(04:58):
monthly mortgage payment, even if it's a little bit higher than your rent, remember, when you have
a mortgage, you're paying yourself, right? You're buying an asset. You're not wasting money and
giving and making somebody else rich. So if the answer is yes to those questions, then yes, it's
the right time to buy. Right. You can always adjust the mortgage in the future. You can, you know,
(05:19):
if the rates go down, then you can refinance. But I don't know. That's kind of my current approach,
my current thinking. What about you? What do you think? Well, I love that you touched on, you know,
you're paying for an asset. You're investing in something when you're paying a mortgage.
(05:40):
You know, I mean, you figure what average rent in Yuba City is probably around 16 to 1800.
So 1600 over a span of 12 months, it's like $19,200 that you're just flushing down the toilet.
Correct. Whereas if, yeah, if it's the right time for you to buy and everything's stable and you're
(06:01):
going to have, you know, the same job for long term, let's stop flushing that money down the
toilet and let's actually put it into an asset that not only appreciates some value over time.
Correct. But you're pumping that money into it to where your loan amount decreases every year.
(06:26):
So your equity is growing exponentially and not just disappearing. You know,
you're not just throwing it out the window and letting the landlord suck it all up.
Yeah. And another way to think about it, and it's a little bit kind of, it's,
it makes your brain twist a little bit when you think about it this way. But many first time
(06:47):
home buyers come to me and to my team here at Snapfi and they ask the question, you know,
they say, I am spending 1700 on rent. Can I buy a house with and keep my monthly payment about the
same? And it kind of makes sense, right? You know, it's kind of basic math. I'm already paying 1700.
(07:08):
If I can buy a house with 1700 a month, it makes sense. Yeah. The reality is that when you're
buying, when you're renting, 1700 dollars are not building anything, right? But when you're
spending 1700 on a mortgage, a portion of that goes towards your principal. So you kind of,
it's basically, it's not, it's not savings, but you're basically buying an equity buy in an asset.
(07:32):
That's why I use the word buy in an asset. Now, buying a house is a sacrifice and it will always
be a sacrifice. It can be as simple as just making the same payment as your rent. Because if you wear,
then everybody will be buying a house right now, right? And everybody will be a homeowner.
So it typically is a sacrifice. And most of the time it ends up being a little bit more than what
(07:54):
you pay in rent. Think about it this, what I tell people is think about it this way. If you, a portion
of your mortgage payment is going to be interest. So think about that interest as you are paying a
bank or financial institution for the opportunity to build an asset, right? They're giving you the
money to build an asset for you, that equity for you. So you're paying that interest as basically
(08:17):
buying the opportunity to continue to save on that asset. When you put that payment towards that asset,
that asset also is increasing in value over time. As long as that increase in value is higher than
the interest that you're paying, and as long as that interest amount that you pay in every month
makes sense, then and you're able to make that payment, you're always going to win, always,
(08:40):
always on the win. So on the win side. So it's a different mentality. You can't just say, well,
can I just pay the same amount of money I'm paying? Well, no, because you're just renting. Now you're
going to buy a real asset. So as long as you can make that monthly payment, buying a house is always
a winning proposition. As long as you keep that asset for long enough. And everybody asked me,
(09:08):
what does that mean long enough? It means different things in different markets. In some markets,
it could be as little as three years, you have built enough equity. In some markets,
it might take a little longer. But what we do know based on historical data is that if you hold
a real estate asset long enough, you're always going to have a return. Yeah. And I think that's
(09:33):
really true. I mean, you know what the real estate cycle used to be 10 to 12 years, right?
And I think with the advent of technology, and we've talked about this a little bit before,
it's shortened it. You know, and I think it's shortened it to more of like an eight year cycle
where I think over five to eight years, you're really going to be able to see a return on that
(09:56):
investment. As long as you're up on your payments, people, don't skip a payment and think that you're
not going to be penalized for it. You pay your bills on time, you make sure that your mortgage
is paid and up and true. And when it comes down to it and you want to sell, more than likely,
(10:18):
you're going to be in a positive, accurate situation where you can sell make quite a bit of profit
after a certain amount of time. I mean, you know, and we always talk about we play the game like
we, we sell one is high and we rent one is low, right? So once you own this asset, if you know,
you're in a situation where you don't like the amount of money that you could potentially make
(10:43):
off the sale of your home, just rent it out. It's right now. Passive income and step up to the next
house. Yeah. On on your on your on your path of travel, you know, I have especially the first
time home home buyers, I try to let them know that this isn't your forever home. This is your
(11:04):
first home. You know, so let's let's just take it one step at a time and build a portfolio that way
you have something coming in and you're building up enough to where, you know, you can start seeing
where generational wealth comes in there and life happens, right? Life happens. You can make a plan
(11:29):
buying a house for more than three to five years at a time. You just can't. Yeah, it's life changes
all the time and life throws things at you all the time. People get sick or people get healthy,
people get newer jobs, people have to move. They have new kids. I have, we have a customer right
now in the Sacramento area who bought a house with us about two years ago and they thought that was
their house. They had a two a three year old girl at the time. And that was it. That was family for
(11:56):
them and they didn't have any plans of adding anybody else to the family and a two bedroom home
was absolutely wonderful and great and in low payment and they could have to go to Disneyland
and do other things with their young girl. Well, guess what? Wife is pregnant. Yeah,
but they didn't plan for it. They didn't want it. They were happy with one child and now they have
(12:19):
a beautiful another girl and they're go like two bedrooms is not going to be enough. This is too
small house for us. What do we do? We can buy another house. What do you mean you can buy another
house? Let's let's run the numbers. The challenge that we have in this current market is that
because of what happened during COVID and the rates being in the low in the low twos and between
(12:43):
two and 3% all of us or the majority of the people who are paying attention, we all refinance. So we
have an incredible low mortgage payment and fantastic rates. Those rates are not going to go. I'm
not going to say never, but like the chances of us going back to a two or 3% interest rate market
are very slim, very slim, if not zero. Yeah, there would have to be like a catastrophic event again.
(13:10):
So here's the reality. You say, you know, rent when it's low. Well, that's the reality is that most
people that want to sell their house and buy another house, they find themselves in a situation
where the monthly payment right now is a two or 3% interest rate. And when they buy another house,
it's going to be a 6% interest rate. So that's a tough pill to swallow, right? That's a jagged little
(13:31):
pill as our friend Alanis Moller said would say. But what so what do you do in this case?
Well, it's an option to rent out the current home and you can use the income from that home in many
cases. The different rules for this conventional FHA, etc. But you can in principle use that income
(13:53):
to help you qualify for the next house. So when we explain this to this customer of ours, he was
he was like, wait a second. So that means that I get to I got I got two assets now. I get to use
the rent on one of that asset and I get to use my monthly payment to build another asset. And it's
like the just like his eyes were like so wide open. I need you to spend this to my wife and
(14:20):
I'm going to involve because this is awesome. But but that's that impacts buyers too, because you
don't have the reason why we don't have that much inventory right now is because people don't want to
give away the assets because they're holding the equity number one. And number two, the interest
rates are so low. Why not keep it right? Well, the rental the rental market is so hot right now too. I
(14:42):
mean, it's insane to me what people are paying in rent. I remember when I first had my my very first
apartment, you know, it was like 18. I think we're paying like 600 a month for this just a normal
little apartment, you know, but yeah, I would hate to see that things going for right now. Oh, gosh.
(15:04):
Geez, that was back in the days. You see you were sitting is about 1615 1700.
Sacramento is 2000. That's kind of the norm. Bay Area is 3,000 3500.
If you want to buy it, if you want to rent a four bedroom five bedroom home, which is a large home,
I know, but that's easily 5000 bucks in the Bay Area. Even even kind of traditional inexpensive
(15:32):
markets like Stockton, Manteca or Tracy, those prices are not cheap anymore. No. And you have
said it used to be that, you know, cheap marketplace, right? Like, it's not anymore. You're spending
between 1600 1800 a month. And, you know, you're not getting very much. Think about it. It makes
(15:55):
sense. It's very close by Sacramento. It's, you know, it's North California without being North
California, right? You get to everything. You. So it totally makes sense. Any anything, you know,
two or three hour distance from the Bay Area from Sacramento is gonna is gonna end up in those price
points. Well, in the cities growing to, you know, we do a Janell and I do a bus tour with the mayor
(16:20):
every year. It's like, it's just a fun thing they do for certain community members that
kind of people that are paying attention that get selected for it, you know, we, we enjoy it, but
they're talking about putting in just a ton of homes in South Uva City over the next like five to
10 years. And, you know, that's going to drive prices up. That's going to keep rents going up.
(16:47):
I don't want to say skyrocketing, but it is what it is. He's also going to have a positive economic
impact is going to bring, you know, new stores, new grocery stores, new restaurants, new places to
go hang out with your family. So you have to drive to the city next door to those, those, you
know, entertainment or benefits and all those things. So I think it's a good thing. I think it's,
(17:11):
it's, it's the engine of economic development. So to build those houses. So I'm, it'd be interesting
to see how, how it impacts, but I do like my quaint little towns, but it gets to where progress,
you can't really stop it, you know,
Yeah, we don't have any control over it. So just kind of surf with it. But yeah, it'll be exciting
(17:35):
to see, you know, the people that I'm putting into homes right now in our, in our area, it'll be
exciting for me to see what they're worth and where their equity is at in five to 10 years.
Because I'm watching prices pretty steadily increase. And they haven't stopped doing that,
you know, there was a short time, probably six months ago, where prices were coming down and
(18:03):
I'm using the word normalized again, because we are back to a normalized market as far as COVID's
gone. Right. Right. That, that age is gone and it's normalized. Yeah. Out of the way. Absolutely.
You know, so we're no longer 130,000 over inflated in our area. You know, it's,
(18:29):
yeah, it's kind of nice, but it's still, it's still expensive. You know, it took its toll and
what, you know, it'll keep climbing is what I'm seeing with more people coming, more houses
being built. You know, we're going to start seeing a little plateau, but
those new home developers are going to want the premium. That's just going to dry press this back
(18:53):
up. Yeah. And I like that you, you explain it from your point of view, because you're an expert in
your particular market, right. And so you see what's going on in your market. Right. Guess what?
It's very similar across the nation and every market is different. But if you think about what
all the apocalyptic, you know, negative thinking, like, oh my gosh, the market's going to crash. I
(19:14):
have so many of those customers, by the way, it'll be, it's actually really funny to have these
conversations with them sometimes because they're just waiting for the market to crash. And there's
a graph, where's the market going to crash? So I can buy my house and I go like, you got to wait
for a long time, my friend, because it's not crashing. And there is some adjustments that
(19:37):
are happening, especially in some markets. If you go back to pre COVID, the market was already
going hot for certain metropolitan areas like that have been developing really fast.
Austin, Texas comes to mind, anywhere around Phoenix, Tempe, Gilbert, Chandler area,
(19:59):
you know, we're talking about home prices doubling within a few years, right. Really fast,
fast moving home values in the Bay Area as well. And there's so many places outside of the Bay Area
that went through this, including some of the ones that I just mentioned, Manteca, Tracy,
to an hour and a half away, U of C D as well. So there's a lot of these places that went really
(20:26):
fast in terms of value creation for homeowners. And now we're adjusting, right. And now there's an
adjustment happening. And now there's prices of some homes are coming down a little bit,
maybe by 5%, maybe 10% in some markets going down, but now stable, right. And it's as long as the
(20:46):
economy doesn't go completely nuts, which so far seems to be holding up, is not really healthy by
any means, we still have work to do in the economy, but it's not going, it's not going crazy nuts,
right. So as long as that stays in place, and our government doesn't, you know, go crazy with
the budget and starts printing money again, then we should have a normalized stabilized
(21:10):
environment where home prices will not crash or will not go down significantly.
Yeah. So again, going back to the original question, when is the right time to buy,
when you can't, when you have the numbers, when you have the finance, and again,
that's a personal question, not a macro question.
No, I agree. Absolutely. Man, what else can we cover today?
(21:34):
Oh my gosh, we cover so much in 20 minutes. I thought you said we wanted to be short.
So well, hey, we appreciate you coming on today. I always love talking to you.
Likewise. Stick around for a second. Of course. All right. Thanks. Yep. See you.
Rob, what's up man? It's been a while since we've been able to do one of these.
(00:25):
I know we said we're going to try to do them at least once a month and are we at that pace?
No, something always comes up. I mean, you know, life happens. We've been really busy lately,
as you know, just turning and burning them with the buyers trying to get them into houses. It's
(00:47):
been fun. Yeah, no, it's great. It's great to see the activity on the market pick up. That is for
sure a positive development. Yeah, so we've noticed a lot of interesting things happen in the market.
What's that? What are you noticing? Noticing, you know, it's just become really a different
(01:11):
competition for buyers this season. You know, last couple, three years, it's been all
a barry of money coming up our way, cash. Right. So there's no competing with a 10-day deal, you
know, over asking. We're noticing a lot of different loans being able to compete. And
(01:39):
it's just been interesting seeing a normalized market again.
Yeah, that is true. And you use the word normalized market. And I don't want to use
the word normal because it doesn't seem normal yet. But it is at least a new normal. There is a,
and I know that phrase has been used multiple times before, but it is. We're in a completely
(02:01):
different environment, Matt. If you look at, you know, what's going on with the interest rates,
because there's probably one of the top questions I get asked of all the time, are the interest rates
going to go up or going to go down? And my answer is always, well, first of all, I do not have a
crystal ball. And I am not, you know, even the most advanced economists with fantastic models are
(02:25):
often wrong, right? So I always caveat with that. But what we have noticed in the last
six months is that the interest rates are not going down. They seem to have at least
gotten to a peak that makes all everybody risk averse and everybody shy away, which is the
(02:47):
7%. Anything close to 7 or above 7 makes everybody go like, oh, my gosh, what's going on, right?
And you're shy away from it and step out of the market. So it seems to me that with all the changes
that the Fed has implemented, all the increases in rates, it seems to be stabilizing around that
6% to 7% mark tends to be in that middle range between 6.6 and a half. Will it go down further?
(03:17):
I don't think so. I mean, if you look at the big environment, that if you look at the macro
environment, right, like, unfortunately, inflation is still high. It hasn't, it has improved a little
bit, but it hasn't dramatically gone down. Our GDP is expected to be close to zero in the next
(03:42):
few months. And people are still spending money. So it just doesn't make quite sense. The amount
of money that people are spending doesn't commiserate with the fact that the wages are increasing,
but not as fast. So inflation is here to stay, at least for the next few months, at least, I mean,
(04:06):
we're May, I don't see the interest rates having a significant change for the next few months and
even maybe all the way to the end of the year. So I may be wrong, but that's what it seems like. So
I always tell people, people always ask me the following question. Once I don't give them an
exact answer about where the interest rates are going, they always ask me the next question, which
is, is this a good time to buy? And that's such a personal question, Matt. Yeah, that is a personal
(04:34):
question. Like, well, is it, is it a good time for you to buy? Do you have a stable job? Do you feel
your income is not going anywhere? Or are you at risk of losing your job? If you are at risk of losing
your job in the next year or two years, it's not a good time to buy. If you feel stable where you
are, if your industry is stable, if your family is stable, if you have the finances to sustain a
(04:58):
monthly mortgage payment, even if it's a little bit higher than your rent, remember, when you have
a mortgage, you're paying yourself, right? You're buying an asset. You're not wasting money and
giving and making somebody else rich. So if the answer is yes to those questions, then yes, it's
the right time to buy. Right. You can always adjust the mortgage in the future. You can, you know,
(05:19):
if the rates go down, then you can refinance. But I don't know. That's kind of my current approach,
my current thinking. What about you? What do you think? Well, I love that you touched on, you know,
you're paying for an asset. You're investing in something when you're paying a mortgage.
(05:40):
You know, I mean, you figure what average rent in Yuba City is probably around 16 to 1800.
So 1600 over a span of 12 months, it's like $19,200 that you're just flushing down the toilet.
Correct. Whereas if, yeah, if it's the right time for you to buy and everything's stable and you're
(06:01):
going to have, you know, the same job for long term, let's stop flushing that money down the
toilet and let's actually put it into an asset that not only appreciates some value over time.
Correct. But you're pumping that money into it to where your loan amount decreases every year.
(06:26):
So your equity is growing exponentially and not just disappearing. You know,
you're not just throwing it out the window and letting the landlord suck it all up.
Yeah. And another way to think about it, and it's a little bit kind of, it's,
it makes your brain twist a little bit when you think about it this way. But many first time
(06:47):
home buyers come to me and to my team here at Snapfi and they ask the question, you know,
they say, I am spending 1700 on rent. Can I buy a house with and keep my monthly payment about the
same? And it kind of makes sense, right? You know, it's kind of basic math. I'm already paying 1700.
(07:08):
If I can buy a house with 1700 a month, it makes sense. Yeah. The reality is that when you're
buying, when you're renting, 1700 dollars are not building anything, right? But when you're
spending 1700 on a mortgage, a portion of that goes towards your principal. So you kind of,
it's basically, it's not, it's not savings, but you're basically buying an equity buy in an asset.
(07:32):
That's why I use the word buy in an asset. Now, buying a house is a sacrifice and it will always
be a sacrifice. It can be as simple as just making the same payment as your rent. Because if you wear,
then everybody will be buying a house right now, right? And everybody will be a homeowner.
So it typically is a sacrifice. And most of the time it ends up being a little bit more than what
(07:54):
you pay in rent. Think about it this, what I tell people is think about it this way. If you, a portion
of your mortgage payment is going to be interest. So think about that interest as you are paying a
bank or financial institution for the opportunity to build an asset, right? They're giving you the
money to build an asset for you, that equity for you. So you're paying that interest as basically
(08:17):
buying the opportunity to continue to save on that asset. When you put that payment towards that asset,
that asset also is increasing in value over time. As long as that increase in value is higher than
the interest that you're paying, and as long as that interest amount that you pay in every month
makes sense, then and you're able to make that payment, you're always going to win, always,
(08:40):
always on the win. So on the win side. So it's a different mentality. You can't just say, well,
can I just pay the same amount of money I'm paying? Well, no, because you're just renting. Now you're
going to buy a real asset. So as long as you can make that monthly payment, buying a house is always
a winning proposition. As long as you keep that asset for long enough. And everybody asked me,
(09:08):
what does that mean long enough? It means different things in different markets. In some markets,
it could be as little as three years, you have built enough equity. In some markets,
it might take a little longer. But what we do know based on historical data is that if you hold
a real estate asset long enough, you're always going to have a return. Yeah. And I think that's
(09:33):
really true. I mean, you know what the real estate cycle used to be 10 to 12 years, right?
And I think with the advent of technology, and we've talked about this a little bit before,
it's shortened it. You know, and I think it's shortened it to more of like an eight year cycle
where I think over five to eight years, you're really going to be able to see a return on that
(09:56):
investment. As long as you're up on your payments, people, don't skip a payment and think that you're
not going to be penalized for it. You pay your bills on time, you make sure that your mortgage
is paid and up and true. And when it comes down to it and you want to sell, more than likely,
(10:18):
you're going to be in a positive, accurate situation where you can sell make quite a bit of profit
after a certain amount of time. I mean, you know, and we always talk about we play the game like
we, we sell one is high and we rent one is low, right? So once you own this asset, if you know,
you're in a situation where you don't like the amount of money that you could potentially make
(10:43):
off the sale of your home, just rent it out. It's right now. Passive income and step up to the next
house. Yeah. On on your on your on your path of travel, you know, I have especially the first
time home home buyers, I try to let them know that this isn't your forever home. This is your
(11:04):
first home. You know, so let's let's just take it one step at a time and build a portfolio that way
you have something coming in and you're building up enough to where, you know, you can start seeing
where generational wealth comes in there and life happens, right? Life happens. You can make a plan
(11:29):
buying a house for more than three to five years at a time. You just can't. Yeah, it's life changes
all the time and life throws things at you all the time. People get sick or people get healthy,
people get newer jobs, people have to move. They have new kids. I have, we have a customer right
now in the Sacramento area who bought a house with us about two years ago and they thought that was
their house. They had a two a three year old girl at the time. And that was it. That was family for
(11:56):
them and they didn't have any plans of adding anybody else to the family and a two bedroom home
was absolutely wonderful and great and in low payment and they could have to go to Disneyland
and do other things with their young girl. Well, guess what? Wife is pregnant. Yeah,
but they didn't plan for it. They didn't want it. They were happy with one child and now they have
(12:19):
a beautiful another girl and they're go like two bedrooms is not going to be enough. This is too
small house for us. What do we do? We can buy another house. What do you mean you can buy another
house? Let's let's run the numbers. The challenge that we have in this current market is that
because of what happened during COVID and the rates being in the low in the low twos and between
(12:43):
two and 3% all of us or the majority of the people who are paying attention, we all refinance. So we
have an incredible low mortgage payment and fantastic rates. Those rates are not going to go. I'm
not going to say never, but like the chances of us going back to a two or 3% interest rate market
are very slim, very slim, if not zero. Yeah, there would have to be like a catastrophic event again.
(13:10):
So here's the reality. You say, you know, rent when it's low. Well, that's the reality is that most
people that want to sell their house and buy another house, they find themselves in a situation
where the monthly payment right now is a two or 3% interest rate. And when they buy another house,
it's going to be a 6% interest rate. So that's a tough pill to swallow, right? That's a jagged little
(13:31):
pill as our friend Alanis Moller said would say. But what so what do you do in this case?
Well, it's an option to rent out the current home and you can use the income from that home in many
cases. The different rules for this conventional FHA, etc. But you can in principle use that income
(13:53):
to help you qualify for the next house. So when we explain this to this customer of ours, he was
he was like, wait a second. So that means that I get to I got I got two assets now. I get to use
the rent on one of that asset and I get to use my monthly payment to build another asset. And it's
like the just like his eyes were like so wide open. I need you to spend this to my wife and
(14:20):
I'm going to involve because this is awesome. But but that's that impacts buyers too, because you
don't have the reason why we don't have that much inventory right now is because people don't want to
give away the assets because they're holding the equity number one. And number two, the interest
rates are so low. Why not keep it right? Well, the rental the rental market is so hot right now too. I
(14:42):
mean, it's insane to me what people are paying in rent. I remember when I first had my my very first
apartment, you know, it was like 18. I think we're paying like 600 a month for this just a normal
little apartment, you know, but yeah, I would hate to see that things going for right now. Oh, gosh.
(15:04):
Geez, that was back in the days. You see you were sitting is about 1615 1700.
Sacramento is 2000. That's kind of the norm. Bay Area is 3,000 3500.
If you want to buy it, if you want to rent a four bedroom five bedroom home, which is a large home,
I know, but that's easily 5000 bucks in the Bay Area. Even even kind of traditional inexpensive
(15:32):
markets like Stockton, Manteca or Tracy, those prices are not cheap anymore. No. And you have
said it used to be that, you know, cheap marketplace, right? Like, it's not anymore. You're spending
between 1600 1800 a month. And, you know, you're not getting very much. Think about it. It makes
(15:55):
sense. It's very close by Sacramento. It's, you know, it's North California without being North
California, right? You get to everything. You. So it totally makes sense. Any anything, you know,
two or three hour distance from the Bay Area from Sacramento is gonna is gonna end up in those price
points. Well, in the cities growing to, you know, we do a Janell and I do a bus tour with the mayor
(16:20):
every year. It's like, it's just a fun thing they do for certain community members that
kind of people that are paying attention that get selected for it, you know, we, we enjoy it, but
they're talking about putting in just a ton of homes in South Uva City over the next like five to
10 years. And, you know, that's going to drive prices up. That's going to keep rents going up.
(16:47):
I don't want to say skyrocketing, but it is what it is. He's also going to have a positive economic
impact is going to bring, you know, new stores, new grocery stores, new restaurants, new places to
go hang out with your family. So you have to drive to the city next door to those, those, you
know, entertainment or benefits and all those things. So I think it's a good thing. I think it's,
(17:11):
it's, it's the engine of economic development. So to build those houses. So I'm, it'd be interesting
to see how, how it impacts, but I do like my quaint little towns, but it gets to where progress,
you can't really stop it, you know,
Yeah, we don't have any control over it. So just kind of surf with it. But yeah, it'll be exciting
(17:35):
to see, you know, the people that I'm putting into homes right now in our, in our area, it'll be
exciting for me to see what they're worth and where their equity is at in five to 10 years.
Because I'm watching prices pretty steadily increase. And they haven't stopped doing that,
you know, there was a short time, probably six months ago, where prices were coming down and
(18:03):
I'm using the word normalized again, because we are back to a normalized market as far as COVID's
gone. Right. Right. That, that age is gone and it's normalized. Yeah. Out of the way. Absolutely.
You know, so we're no longer 130,000 over inflated in our area. You know, it's,
(18:29):
yeah, it's kind of nice, but it's still, it's still expensive. You know, it took its toll and
what, you know, it'll keep climbing is what I'm seeing with more people coming, more houses
being built. You know, we're going to start seeing a little plateau, but
those new home developers are going to want the premium. That's just going to dry press this back
(18:53):
up. Yeah. And I like that you, you explain it from your point of view, because you're an expert in
your particular market, right. And so you see what's going on in your market. Right. Guess what?
It's very similar across the nation and every market is different. But if you think about what
all the apocalyptic, you know, negative thinking, like, oh my gosh, the market's going to crash. I
(19:14):
have so many of those customers, by the way, it'll be, it's actually really funny to have these
conversations with them sometimes because they're just waiting for the market to crash. And there's
a graph, where's the market going to crash? So I can buy my house and I go like, you got to wait
for a long time, my friend, because it's not crashing. And there is some adjustments that
(19:37):
are happening, especially in some markets. If you go back to pre COVID, the market was already
going hot for certain metropolitan areas like that have been developing really fast.
Austin, Texas comes to mind, anywhere around Phoenix, Tempe, Gilbert, Chandler area,
(19:59):
you know, we're talking about home prices doubling within a few years, right. Really fast,
fast moving home values in the Bay Area as well. And there's so many places outside of the Bay Area
that went through this, including some of the ones that I just mentioned, Manteca, Tracy,
to an hour and a half away, U of C D as well. So there's a lot of these places that went really
(20:26):
fast in terms of value creation for homeowners. And now we're adjusting, right. And now there's an
adjustment happening. And now there's prices of some homes are coming down a little bit,
maybe by 5%, maybe 10% in some markets going down, but now stable, right. And it's as long as the
(20:46):
economy doesn't go completely nuts, which so far seems to be holding up, is not really healthy by
any means, we still have work to do in the economy, but it's not going, it's not going crazy nuts,
right. So as long as that stays in place, and our government doesn't, you know, go crazy with
the budget and starts printing money again, then we should have a normalized stabilized
(21:10):
environment where home prices will not crash or will not go down significantly.
Yeah. So again, going back to the original question, when is the right time to buy,
when you can't, when you have the numbers, when you have the finance, and again,
that's a personal question, not a macro question.
No, I agree. Absolutely. Man, what else can we cover today?
(21:34):
Oh my gosh, we cover so much in 20 minutes. I thought you said we wanted to be short.
So well, hey, we appreciate you coming on today. I always love talking to you.
Likewise. Stick around for a second. Of course. All right. Thanks. Yep. See you.
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