How Real Estate is Reacting to the Election, Interest Rates, the NAR Lawsuit and Climate Change
49:44 Share

One of the most stressful periods of my life was when I was in credit card. Dad, I got to a point where I just knew that I had to get IT under control for my financial future and also for my mental health. We've all hit a point where we've realized ed IT was time to make some serious money moves.

So take control of your finances by using a tim checking account with features like no maintenance fees, fee free over drapped up to two hundred dollars or getting paid up to two days early with direct deposit, learn more at time, outcomes slashed. M, M, N, when you check out time, you'll see that you can overdraft up to two hundred dollars with no fees. If you're an og listener, you know about my infamous thirty five dollar over draft, a fee that I got from ying, a seven dollar or a lot, and how I am still very fired up about IT.

If I had tried back then, that wouldn't even be a story. Make your false finances a little Greener by working towards french at two goals. With trim, open your account in just two minutes at tim dcom slash mn.

That's tim dcom slash M N N time feels like progress banging services and debt Carried by the in corp bank N A or stride bank N A members F D I C spot me eligibility requirements and overdraft limits apply boots are available to eligible child members enrolled in spot me and are subject to month limits. Terms and conditions apply go to try to come flash disclosures for details. I love hosting on airbnb.

It's a great way to bring in some extra cash, but I totally get that, that, that might sound overwhelming to start or even too complicated if, say, you want to put your summer home in maine on airbed, but you live full time and sometimes to go and you can go to mean every time you need to change sheet for your guest or something like that, if thoughts like have been holding you back, I have great news for you. Airbnb has launched a co host network, which is a network of high quality local cohoes with airbnb experience that can take care of your home and your guests cohoes can do what you don't have time for, like managing your reservations, messaging your guests, giving support at the property, or even create your listing for you. I always want to line up reserved for my house when i'm traveling for work, but sometimes I just don't around to IT, because getting ready to travel always feels like a scream mbl.

So I don't end up making time to make my house look, yes, friendly. I guess that's the best way to put up. But i'm matching with a cold so I can still make that extra cash while also making IT easier on myself.

Find a go host at airbnb, a dot comsat h host. I'm call lap on the only financial expert. You don't need a dictionary to understand. It's time for some money. We have.

Realize is affected by a bunch of different economic factors, interest strates, supply and demand inflation, but is also affected by elections. Of course, the market will be impacted by the policies put in place by whoever is our next president. And I did a whole episode about Harris platform on real state and trumps platform on a real state, which I was in the show notes in case you've missed IT.

But there's one particular policy proposal that is so hotly debated, which is trumps plan to make housing more affordable by deporting undocumented s of course, there are ethical and human rights implications to mass deportation. And this, of course, is an immigration issue as much as IT is an economic issue. And immigration is not so much partition as IT just is deeply inflaming.

So today i'm going be the economic impact of that policy should have be put into effect. And joining me to talk IT through is john grumman. John has been in the show twice before, so he needs no introduction, but I will give him one anyway.

John is a real estate agent extraordinar in california and a super smart expert in the industry. And we do get into what policy would make housing more affordable, but that is not all. We also do a vive check on the housing market as a whole, talk about how climate disaster has affected real state.

And john tells me which buzzy realest state tips online are true and which ones are big easy. John, grandma, welcome back to money we have. Thank you.

So we have to start by giving an overall real estate vibe check what is going on. I love talking to your super on the polls of all things real estate. And you break IT down in a really easy way, which is our jam, as you know. So is that a buyer or sellers market? I know that's a very simplicity c question, but yeah, you had topic I don't .

know that I could pick because that such I know I can make that generalization across so many different markets across such a large country. I would say that in general, though, the housing markets just kind of stuck in neutral at the moment, we've seen the first rate cut, which is great. The fever broke at least like that parts behind us.

IT hasn't really had any meaningful impact on mortgage interest rates, right? So IT hasn't offered that affordability of the people are looking forward to be able to start coming off the sidelines in reengaged. And mostly, it's just this palpable sense of hesitation, uncertainty in face of the upcoming election.

That's the big thing, is that most people just don't want to make big life decisions in the face of uncertainty. And this election has created so much uncertainty and all the markets, capital markets, housing markets and so forth, that everyone right now is just kind of taking this. I just want to a wait and see approach and that has in a press statement market.

we saw the fed to cut rates. yeah. So we're now targeting four point seven five to five percent that the mortgage rate is still six point seven percent. So for anyone who doesn't understand the relationship between the fed funds rate and mortgage rates can please explain.

yes, it's pretty simple. So when the fed lowering rates with their lowering is or when they change rates, what they're changing is the federal fund rate. That is essentially the overnight rate at which banks can loan money to and from one another. IT does not have a direct correlation to mortgage rates unless we're talking about a second mortgage.

Like a homework, we like to credit, which is directly tied to the prime index, which is tied to what the fed does, but mortgage interest strates are going to be based on much broader economic policies like inflation and the demand for bonds. So we haven't really seen much of an impact mortal rates. They are certainly lower today than they will say a year ago, but they haven't gotten into that's zone where I think people gonna really be motivated to start to reengage.

To me, that needs to have a five handle on IT. And while some mortgages are now starting be Priced in the high fives, yeah now i'm definite seeing that are particularly on the arms, seven your arms, ten your arms, not so much on the thirty year fixed, but we are starting to see rates in the low sixties high fives. It's not enough, again, especially in the face of an upcoming election, to get people off the sidelines yet.

But we're finally going in the right direction. I think by all accounts, we could argue that we are at the bottom of the jay curve and on our way towards the accent. It's just a question of how long it's going to take us to get there.

okay. So to be clear, arms or Justin ate marketers more closely follow what the fed that does when jap does no .

arms are justice rate mortgages that are tied to certain index, like the library index that Operates separately from the prime index. The prime index is tied directly to what the fed does, right? So if you have a homework, reland credit and the fed lowers the rates by a quarter of a percent next month, your Morgan statement will reflect that quarter of a percent.

Arms are gonna tied to again, perhaps like the library index, and it's can be fixed or whatever that period of time is. So you have a seven year ARM. IT means it's fixed for seven years, but advertized over thirty. So at the end of that seven year period, IT will adjust to wherever that index is plus whatever margin the bank establishes, which is generally around two and a quarter, two and a half percent. So for those people that locked in arms a few years ago that perhaps may have been a little bit short sighted and not locking in longer, they could potentially have a root awakening here .

when IT address, but adjustable rates follow more closely or more quickly to what the fan does, then fixed rate fix rate follow more closely to the tenure treasury instance. And you did an awesome video about this. We retired IT.

And you or anyone who does not know always how is that correlation because they're all affected. By the way, it's just a matter of me. So what the fed does affects libre, affects overnight interest, strates all of that self.

And then IT trickles down eventually to adjustable rate than fixed rate after that. So IT flows. But she's like IT flow slower.

IT flow slower. And there isn't sort of a direct lineage of IT, right? There's also other different factors, again, like the demand for treasury y bonds and so forth, which is not really a part of that equation, but factors in so look, it's obviously it's not black ker White IT would be awesome if you were, but it's a little bit more nuances than that. The main point is that just relative to wear inflation currently sits and where the economy sits, where haven't seen that huge Justine and rata.

And the reality we may not we're not going back to the days of three and four percent interest strates that was an anomaly tied to a global pandemic um but would be great if we could get rates to settle somewhere in the load amid fives for a sustainable period that people could adjust to that new norm and feel like they were motivated and encouraged to get back into the market. And I also I said that almost says that only pertains to buyers. IT retains the sellers equally as much right sellers that feel like they have these than handcuff s that are tying them to these two and three percent interest strates, but want to make a move either they want more space, so they got a job location or whatever IT may be. You know, the leap from three to five or five and a half is a lot more a palatable than the leap from three percent of seven percent.

And there are squatting on their own houses. Get out of there, guys.

It's been a real chAllenge in terms of freeing .

up in the but generally, if you're starting to get into the home buying market and you want to get a sense of where more geraes are going to be, you can look at the ten year treasury.

You can follow the treasury as an indicator for sure. But in terms of actually understanding how that equate and correlates to mortgage rates, reach her child to your local marriage record.

That's the simplest way to do IT. Well, the fed is meeting again in november. Yeah how excited are .

you like Christmas morning? We're .

expecting another rate cut potentially .

will see I don't know you know again if there so much uncertainty right now. The jobs report in september, which was a favorable report, doesn't lend towards faster rate cuts actually shows that perhaps the economy is more stable. We don't need to cut rates as quickly.

So it'll be interesting to see what they do um ultimately be. We're going to need, I think, several rate cuts in our real view before we really get to the point where the market arts hummer again. My hope ah is that, that all sort of coincides with as we ramp er way into the spring selling season, which is always the most optimal time in of the year.

And we have that ramper. If you look at and go, this could really line up very well here where we have time for a few more rate cuts and all of that kind of ramps. At the same time, with the spring selling season, the market is really sort of poison to take off.

Let's go. Let's but if you are targeting five fish percent or that's your hope, your hopes and dreams for five fish percent, stable mortgage rates yeah the fed fund s rate would have to be in the trees likely.

Well, again, we just establish not directly correlated. So I think that well before, i'm sure that there are various different graphs that you can show where and you can look at what the correlation has been between the fed foundation and mortgage industries. I think what we're experiencing right now coming out of this historical high inflationary period is, is going to differentiate a little bit from that.

First, basically, what what's pricing is that banks take profit that's acx. There are some other things factor in, but to get to five, we would probably need more cuts.

Yes.

I think that's right. And you're hoping that will happen or how do .

you think i'm going to think? I mean, look, the fed came out at what was IT, I guess, the end of last year and said they were anticipating anywhere between four to six cuts this year. And you know we just saw the first cut.

So I know that they've talked about potentially reducing the federal funds rate by two percentage points next year. That would be tremendous if that happens. But we've seen in the past that IT may fear off from that course.

And I just don't know. Again, my feeling is that the housing market, the capital markets, they're all benefit from obviously lower interest rates. And I think that those markets are jumping at the bit and so poised to take off.

I think that i'm very put this way. I'm uncertain of what the next sixty and the and eighty days might look like. I'm very bullishly what the next sixty nine months are going to look like.

I think the first cut is the .

deprest OK.

J, how is that in land? Is more that song?

I think IT is I think job .

is listening to that song. I think yeah, they kind of overshot with the with the fifty basis points, and we will probably go back to twenty five.

I agree with that. I think you will be more measured which IT should have been from the beginning, right? If we look at the sort of reverse of this and how interest strates, how quickly interest rates climbed, IT was the fastest and highest st Spike in history in such a short period time.

Why weren't they raising about a quarter per quarter just gradually ease their way into that? The realities, I think that they got greedy things were too good for too long, and then they had to make more a drastic correction. And you know, that's just the world that we live in right now, have drastic extremes as a pendula swings, swings from one side to the other, but is not good for markets.

Agreed, well, is in will IT is out and we so freaked out and hot bothered to around bedtime. Hold onto your wallet. Money we have will be right back.

One of the most stressed periods of my life was when I was in credit card debt. I got to a point where I just knew that I had to get IT under control for my financial future and also for my mental health. We've all hit a wink where we've realized IT was time to make some serious money moves.

So take control of your finances by using a time checking account with features like no maintenance fees, be free overdraft up to two hundred dollars or getting paid up to two days early with direct upon IT learn more at time outcome slash M N. When you check out time, you'll see you can overdraft up to two hundred dollars with no fees. If you're in an O G listener, you know about my infamous thirty five dollar overdraft, a fee that I got from ying, a seven dollar or last day, and how I am still very fired up about IT.

If I had time back then I wouldn't even be a story. Make your false finances a little Greener by working towards your french anal goals with trim. Open your account in just two minutes at tim dcom slash mn.

That's tim dcom slash mn time feels like progress. Banging services and debit card provided by the bank corp. Bank N, A or stride bank N A members.

F, D, I, C, spot me eligibility requirements and overdraft limits apply boots are available to eligible child members enrolled in spot me and are subject to monthly limits. Terms and conditions apply. Go to try me to outcome slash disclosures for details. I love hosting on airbnb. It's a great way to bring in some extra cash.

But I hardly get IT that IT might sound overwhelming to start or even too complicated if, say, you want to put your summer home in maine on airbnb, but you live full time and to go and you can go to mean every time you need to change sheet for your guest or something like that, if thoughts like these have been holding you back. I have great news for al arb. B has launched a cohoes network, which is the network of high quality local cohoes with a bb experience that can take care of your home and your guests.

Cohoes can do what you don't have time for, like managing your reservations, messaging your guests, giving support at the property, or even create your listing for you. I always want to link up a reserved for my house when i'm traveling for work, but sometimes I just don't get around to IT, because getting ready to travel always feels like a scramble, so I don't end up making time to make my house look, yes, friendly. I guess that's the best way to put IT, but i'm matching with a cold so I can still make that extra cash while also making IT easier on myself. Find a go host at airbnb, a dot coms lash host. And now for some more money.

we have.

So john, last time you were on, we talked a lot about the looming ing at that point, and I lost you. Yeah, you explained IT then. But since you were last year, IT happened.

So how has that affected the market? And buyers relationships with brokers, sellers relationships with progress. Those are both great questions.

And I think it's first important to just distinguish the difference between those took questions because there are two entirely separate issues. So IT hasn't really affected the market because it's not meant to affect the market. These are internal policy changes that relate to the way we, as reacted agents Operate within our industry, not how it's going to affect home values and home Prices in the housing market in general.

So that's one point in terms of how it's affected the realistic industry, I think it's just new territory for everybody. I think everybody is really just in a place where they're trying to figure out know, is this is this the new world order or is this just business as usual? Um ultimately, what IT really is, is a more circular route to the same destination, right? It's in most instances, I am finding that IT is still the seller that is paying the commission to both sides.

It's just structured a little bit differently today. So the simplest way to explain this is that as a result of the N R. Settled, there were a couple of specific policy changes that when they do effect, one of them is that agents are no longer allowed to advertise the commission that is being offered to the CoOperating broker I E, the buyers agent via the ml, which is somewhat ironic because that was one of the reasons that emos was initially establish, which actually to have a place to hold that information is no longer allowed to be there.

IT does not mean that commissions can still be offered there. I just can't be advertised. And the reason why they implemented that was to try to guard against something called steering because there was an argument made during the court case that some agents, some bad actors, let's say, in middle america, were steering their clients towards listings that we're offering higher commissions.

Now that doesn't really play in a market like L A, where I live in work because it's about match making. I've never once ever been thought about directing a client to a listing, is offering more commission and that somehow I was going to make that the right house for them. It's about finding the right house for them. And then the commission is dealt with separately.

I mean, very convincing, but I don't think you're going to be that convincing to make somebody want to buy a house. That's not my job.

That's not my job. My job is to never try to sell someone on what suit or shouldn't feel like the right home for them. That's a personal decision that they have to come to on their own.

My job to help negotiate, to steal for them, to be a steward that guides them through this very foreign process. But I i've never, i've truck me for this way. I've talked clients out of buying many more homes and i've ever attempted to talk a client in to buying a lot of time is like, trust me, this isn't the right house for you. There will be others. But i've never said like you have to buy this.

That's just not but that's never driven by one percentage point of commission.

No, no. So there's a lot of faults with these new policies. One of them is IT is now someone counter productively created a different kind of steering where now agents are gona call the listing agent and say, are you offering a commission on this listing and if the agents says the listing agents says, no, sometimes the buyers agents guys say, well, i'm not going to show this so while they implemented this new policy to try to guard against steering is simply created a different kind of steering, perhaps the worst kind.

The second policy change that I would say is most significant is that buyers are now required to enter into A, A, A buyer agency agreement with their broken well before buyers could go out their sort of using whom ever they want. They now need to have an established agreement with their agent, with their broker. And that agreement needs to state specifically how much that buyers agent is gonna make the sort of nonsense part of this is that you're sitting down with a client, a buyer, to enter into this reaming and establish how much you're gonna make before you have identify a property and determine whether not that property is offering a commission.

So again, there's a lot about this that in my opinion, does not make sense. I don't think IT was particularly well thought out, but what happened is i'm sitting down with you. okay?

We're going to go to look for a house. We're going to agree that my commission can be up to this amount because within the agreement, you can make less, but you can never make more, right? So I have to set with a maximum. Mt, is that I can make.

Then we go out looking, and I might take a week and I take a month, I take years, and then we identify the property, determine whether the offering, a commission or a portion, the commission, and who's paying IT IT all get sort of thrown into the pot. Now, that was like a word, a big word, sand, which I just threw you, was a lot of information. But that's that's the just a bit, we have to stop a few more times long way that a cup more eyes, cross cup more tears.

Ultimately, we're getting to the same place. There's just so much misinformation. There are so many, most numerous to out there that, you know, my approach to this right now is educate, don't defend right there.

There's a lot of fear, but that fear can be alleviated with facts. So it's just a matter of explaining to people like I sit down, people I go I heard commissions are now negotiable. Commissions have always been negotiable.

That's not new. It's just that you read the sensationalized headline of an article but didn't go a little of deeper or someone that says the commissions can be financed. It's like commissions can be financed independently, but theyve always been finances part of the purchase Price. That's why it's always been baked into the purchase Price. So again, it's a lot of just educating of .

this or maybe they didn't know that they can negotiate before.

Yeah, that's probably IT is that people just say that like that was the the basis of the whole case was this argument of collusion that as an industry we were holding lining the fee is x three percent to and eight percent and not saying the fees negotiable, we charge x that's the basis of the whole argument.

So how does that negotiation process look? You have a new client, you give them your fancy paperwork. IT says, okay.

you give them your dog .

or sign whatever you're giving them. How are you giving them the cept that they need to sign now because of that? That's not law, but it's part of this agreement. What is the boiler play fee that you're putting on there?

I'm actually not allowed to say IT. Oh, that's the whole point. Is that if I stayed IT in any type of public forum or anything like that, then IT could be argued that again, they they made some ridiculous guts of collusion and so forth that like I all am, I guess, legally allowed to say I was, it's negotiable.

Now I can sit down with the private client and say, this is what my fear, this is what I charge, right? Which I just share with you was just a standard like industry standard fee, no more, no less. And then we have to go approach the listing agent on introspective property and cy what they're offering, which will often times be tied to the merits of the offer.

You make a good offer, will pay a commission. You make and say shit, offer great, make a shady offer. Then you know, raps are not gonna as amenable to take your commission.

The VISA were Normally paid for by the seller right in these transactions customer.

his oracle, the commission has always been paid for in the .

past by the seller. And so this couldn't be passed on .

to the home buyers. absolutely. So let's say that you have a home mono will call Joshua and he selling us house at one, two, three main street for a million dollars. And he says, you know, I read this article the other day.

You know, I was, listen to this amazing place, this thing is amazing podcast, and I might take away was, I don't have to pay commissions anymore, which, by the way, a lot of people are hearing in reading this. okay. So mr. Seller, that's true. You're not required to pay the commission.

However, let's look at what other listings are available in your market right now and whether not their offering a commission because what you don't want to do is put yourself at a competitive disadvantage relative to what else is on the market. Now if you don't want to pay the commission, that's okay. Again, that's your provocative.

But commissions have always been baked into the purchase Price. So if you are not willing to pay, let's say, two and a half percent, which will be twenty five thousand on that million dollars sale, then the offer or may come in at nine seventy five because the buyer now has to pay that feed directly to their broken. So if you're not covering IT, they're going to in other words, you pull one lover, you pull one down, the other one goes up, it's all connected.

You're paying for IT. Somehow this all works out fine as long as everyone's growing in the same direction, meaning as long as everyone understands that basic principle that like it's being paid for a one way or another, then it's fine. It's when a seller says, well, i'm not paying for IT and I still want my million dollars for the house it's like, look, joe, joe, come on, joe.

I mean, look, I get people want what they want you my daughter wants a ponies that doesn't. He is gonna get one. Like people just need to understand the basic sort of principles and concepts of how this has work because there's a reason behind IT.

But you know this notion that like, well, the buyers have to pay commissions. Now the buyers have always pay commissions that sellers are tech ally, the ones that may be distributed, but the buyers the only one that comes to the table with money at the closing. So technically is actually the buyer is paid IT and the buyers be able to finance IT because IT breaks into the purchase Price and because they're borrow ing a percentage of the purchase Price. So again, it's once if people start by setting that too much, then you the levy starts to break .

is IT an average of about six percent for both agents?

IT depends on how like depending on how you dice IT.

yeah IT depends on the Price.

Often times in middle amErica where you're dealing with lower Prices, that could be six percent. In higher Price point market like los Angeles and new york. And sometimes generally five percent. And once you get north of, say, ten million dollars, sometimes you'll IT be four percent, two percent each side.

And how would you advise someone having that conversation with a broker like this can feel like tough conversations? How much are you getting? How much do you do? Are like these are weird conversations with people that you probably had passive relationships within the past like, oh, the guys showing me out and yeah, IT wasn't as caught fied as IT is .

now which again was the whole point that was made in that case is that IT needed to be clear. There needed to be more transparency and how brokers got paid because buyers, agents were able to sit down with people be like my fee is free because the cel pace for IT, it's like but it's not it's not free because it's baked into the Price and therefore the Prices inflated to to account for IT. So again, they wanted to be more clear.

So to me, this is where you separate the men from the boys or the women from the girls is in agency ability to articulate their unique value proposition. Now they need to be able to really come in and justify what they charge and how they earn IT. And i'll just save IT.

You know, not all agents are created equally. I embrace this opportunity because respectfully and all the humility in the world, I think i'm a cut above most of the agency in this industry where there's such a low bar. I welcome the opportunity to have these conversations. I think others will .

struggle should we talk about something less complicated? The election.

oh, great. Thank you. nice. Let's talk .

about how the different candidates might affect housing. Trump's saying he wants mass deportation. And how do you think that's going affect the housing market?

IT would definitely have an impact, but maybe not in the way that people would just ordinary think these are people plan instrumental part in in the workforce. And that's where I see the biggest issue is going to be in construction is that if there were mass deportation, what you're going to see is a massive slowdown and construction, which will likely equate to a substantial increase in labor cost because you're going have less labor to draw from and less affordable labor to draw from.

So in a housing market that's already suffering from a lack of inventory and high construction costs, that would be adding insult injury, that would really be kind of like pouring gases on the fire. So i'm concerned in that respect. I'm also concerned in the respective you know, again, many of these undocumented immigrants are not home owners, but their renters.

And I think you could see a significant adjustment to rental values if thousands of them by the droves, were deported. And I think that would be bad for landlords. But you know, again, I don't want to get two political .

about ethical issues with all of that aside. But there are two main things. One, that undocumented workers are probably not living in the types of starter homes that are in such high demand right now that fair.

And second, the construction issue, where is estimated that immigrants makeup at least twenty percent of the construction workforce. In new york city alone, sixty three percent of construction workers are immigrants and forty percent of those are believed to be on document. So if you take that out of the equation, you're going to have higher construction costs, which would like they rive up .

the Price has exactly right again, it's onna slow down the construction process and to drive up the Price, which is good for nobody, right? These people play a vital role in our society and our workforce in terms of the jobs that they do. You know, look, they're not here to eat our dogs and cats. So I I clearly have my feelings about this, and I just leave IT there.

What policy do you think would actually make housing more affordable?

Wow, no. Asked me that question. What policy do I think we would make housing more affordable there?

A lot. That being disaster. Mp also wants to open up federal lands, but that doesn't really apply to L A new york. You that federal government owns a huge percentage of elastic, but like point three percent of connective for them. There is also discussion by vice president herri to give a twenty five thousand dollar down payment credit, which I don't know if that's going to help because then if everybody has two thousand five k extra to play with, the Prices just go up twenty five. Kay, there is also more incentive for commercial real estate developers to build more affordable housing, more tax incentives.

There's no question that affordable housing is you, I think at the the core of a lot of these conversations, and that just goes into building costs, right? It's you got a lot of developers out there, particularly in lay, and that's my markets.

That's all I can really speak to intelligently that have moved away from luxury spectrums because there is less demand and not as active of the market for IT and really move towards trying to crack the code on affordable housing. But it's a tough code to crack. Going back to all the things that we just said, the cost of debt has gone up right more than double from where was a couple of years ago.

The cost of labor went up, the cost of materials went up, but the cost of land or property values have more or less stabilized. So there has been no adjustment for, which means that really hard for these dealers to pencil. Now the government, least here in lesson tos and california, I imagine several other uh markets around the country are offering tremendous incentives to contractors and builders that are willing to do affordable housing.

Is just question of how do you do IT. So I think what you're gna see is a pretty big shift over two modular homes. Modular homes, which always had a sort of negative stigma connotation of like a mobile home, not the same. A modular home is a home that is constructed pre fab.

Take the ones you can get on amazon now for like twenty cag.

Let's say it's a little bit Better of that again, like there's varying versions of everything. But I have a lot of client that have gone head first into this because if you look at IT, first of all, it's it's a more efficient way to build a house. You don't have an inspector that's going to come out eighteen different times without the construction process.

You have an inspector that comes to the factory once they inspected the sign off on a great let's manufactured a thousand of them. They are fire resistant. They are wind resistant, up to one hundred and eighty miles an hours.

They can do much Better in the face of a hurry. Ane or toronto, they do have their limitations, right? They have height limitations, because if you exceed a certain height, can fit in the ge container that needs to ship across the country, across the world.

IT can't fit under a freeway overpass, right? VISA homes that we're not going to see going up cold water canyon or benefit canyon because they just don't fit there. But in other parts of even L A. And certainly the country, there's a real place for this, and you can fabricate them at a fraction of the cost in a fraction of the time. So there are real big government contracts out there that I think a lot of developers are trying to figure, how do I crack the code in modular development to position themselves for those contracts and to be able to actually fix the .

housing crisis? You said chip across the world. So most of its mean in china.

Some some of its made in china. Some of its made in other parts of, I say, asia. There are several factories in the united states. My understanding and I say that very clearly so that like, please check check this but like what i've heard is that they're on average, roughly about thirty percent more than if you're shipping IT from, let's say, asia.

Are they nice? Are they nice?

Here's a thing. It's a shell. It's a shell. So what IT is, is whatever you wanted to be IT shows up and essential to the shell if you want to put in, let's say, engineered flowing, or you want to put in like wide plank, french wide. O, K, is the difference of eight dollars a square foot. That's your program, if you want to.

So you can sup IT up hundred percent.

yeah. If you want to go to an sax and buy your tile at thirty dollars square photo, you want to go to home deep three thousand years, what you make of IT is entirely up to you essentia shell.

Hold onto your wallets. Money we have will be right back. And now for some more money.

we have.

And we're also seeing a lot of co ownership models, you know just to get through this affordable housing crisis and rent own models. Have you seen those increase actually? Yeah, sam, and what do you think about them?

Um you know I think initially IT may just have been a reaction to high Prices. But that said, I think that it's not a short term thing. I think that these are new evolving business models that are going to create more access and affordability for people, and it's part of a new ecosystem that we're entering into much like the you work from home model was in reaction to cove IT, it's clearly something is here to stay.

So I think that between what's happening just within the real thing industry alone, what's happening within the affordability and inventory crisis, this industry is right for disruption. There are gonna some major moves made in the next twelve to twenty four months that are really gona flip this industry on the ted. And these are some of the models that are gone to .

play a part in that. So it's not just a temporary effects. IT could be just a new alternative model that's being flashed out. Yeah I think you if you're buying a home with your friends though and your friendship blows up.

yeah, that's i'll give you more i'll give you more real world example. I personally own a home and nappa, which is my happy place that I have a one eighth fractional ownership in because that gives me six weeks of of use out of the year. I couldn't use IT more than six weeks if I wanted to.

I don't have that much time. But you know, it's a home that i'll just say I wouldn't have been able to afford on my own. But by virtue of having this fractional ownership, I able to have the use and enjoyment of now this really amazing a state up there. And I think you will see more models like that in the future.

So a fans, your time share.

sure. Yes, a fancy your time share got different versions of fractional ownership that allow more accessibility to people.

okay. Can I tell you something that's been on my mind a lot? I'm really concerned, john, about something that doesn't sound fun and sexy, but I think is is going to be a big problem, which is insurance yeah home insurance during the climate crisis, especially in florida and in california, I think they're skyrocketing.

I think a lot of people can get insurance now. They're not factory IT in into the overall budget that they are going out yeah to market with. I'm scared and I think it's you.

You should be legitimately scared. This is the greatest existential threat to real estate, is not interest rate, is not supplying demand. Its climate change, climate change is the greatest threat to realize period full stop, particularly in the coastal al markets that are the luxury y markets in the most expensive markets, of course.

Um I mean, obviously you look at just the tragedies that happened in florida this year, which happened every year. By the way, how long is IT before one of those storms come sweeping through miami? right? Mm has been the biggest winner in the last three years of real state in the united states.

So much wealth has has flocked down there. What happens when? Not if, when one of those storms comes through the center miami and demolishes that real like it's this once in a lifetime.

storms are happening every couple years. That's exactly right.

That's exactly in no longer once in a lifetime. And that's just again, unfortunately, sadly, that's the new world that we live in. But the ability to get insurance as IT relates to that, which is a requirement of alone if you're getting a mortgage, is going to be a major factor. And at some point, I have to imagine not to suggest that the government has all the answers because currently, don't I imagine it's going to to be more government intervention, government subsidies, more things like california fair plan here in california, which have their limitations and ceilings on their coverage. But there's gonna have to be more things like that in the future because insurance companies that are pulling out of these markets are creating a greater monopoly for the ones that are still staying.

How do you think perspective home buyers should be budgeting for climate risk and insurance? I mean, because no longer if you you're looking on the estimate or something like that and in certain areas in particular, whatever they're estimate for insurance is mattia correct.

So I don't know that I have any specific vice on how the budget for depending on whether it's in a high fire zone, flood zone, when zone ea, I would just say don't judge the book by its cover in terms of, oh, I like this. This is what it's going to cost me based on this mortgage calculator.

Dive deeper, get in touch with an insurance broker immediately upon identifying that property and start to really kind of flush that out and understand what those options are, what those premiums are, what the coverage. There have been many instances. Es horst ory.

I'm sure you've heard about with people that have existing coverage getting a call from, you know state farm saying we've tripled your coverage. We've denied we ve canal IT. So it's going to be a major factor that I would just say, try to get in front of as quickly as possible.

And if you're out in the home market, do you talk to your broker? Do you talk to the homeward about what kind of insurance is they have or if they've had issues with cause I know even in parts of li, man of volcanic ia and brand wit malebo, there are areas that are experiencing this very thing. Or it's hard to get or impossible to get your insurance. You have to go to the state. How do you factor that in or who do you ask during the .

home buying process, we constantly ask about IT, but it's not as simples. You would think often times the thought process is, oh, you're with state farming, started to keep picking on state farm, but like here with them, great. We would love to have that coverage just because they're ensuring the current owner doesn't mean they are going to ensure you and doesn't they're going to ensure you at the same Price.

So we've tried that approach and a lot of time is like, yeah, no, they don't want to renew IT or it's going to be double the Price. So again, what the existing home manner has doesn't really play a factor in what you can get. You just need to get with a qualified insurance broker, which if you're working with a good agent, they should have a great referred for you and start having those conversations with them. Just do IT sooner the problem.

You just need to understand what your options are OK. Now, not as complicated of a topic. It's a game. Can we play a truth or .

tand check there?

There's so much real estate for gazi out there.

Zazi.

just like is .

that jitish or is that like is an italian of is IT for gazi?

It's for gazi, I for gazi, right? I don't say that in wolf of wall street. And so we've seen a lot of this stuff on tiktok, on instance meals.

We just don't know if it's truth or trend and why. So we're going ask you, okay, ready? Yeah if you're buying an investment property, you should buy IT through an L, C.

truth or trend. I would generally say truth, but with your cpa or business manager, IT should be only in some type of an entity, whether it's a trusted and lc, just that you have various protections in place, but consult with .

your cpa on that. Okay, use the burn method for a realist. So that's by renovate, rent, refinance, repeat. There are so many .

new terms on and expressions you're using on me as opposed .

to as opposed to buy wholesale.

give me the .

birth again by renovate rent residence.

by reva's people who are .

buying up and jeff investment my properties.

And there I mean that to me is somewhat self evident, like biology ty, where there's value at opportunities, renovate to add that value, which thus should increase your equity and then refinance based on that equity because you have a lower L T V. And hopefully a lower mortgage payments and then are lower interest rate and lower margins payment and then use that leverage to .

go buy more TV like learn to value.

Yeah, I mean, that's that's the sort of basics of real state investment.

Choose a forty year mortgage if you can get one. The trend.

i'm going to say neither, but worth looking at.

So for a fifteen year.

no, totally different. So okay, so mortgage is this is just this is news fest for some people. But and I only know all this, by the way, because I was a mortgage broker for eight years.

That's why I can speak this language fairly fluently, is that mortgage are advertized of a certain puter time is generally thirty years. That's why people know of a thirty year fixed. If is amOrtized over forty years, that just means that the amOrtization party gets spread out further and thus the payment along where smaller.

there's more interest rates.

absolutely paying more interest in a long run. But you have a shorter payment, lower payment in the short term, which is what matters to most people. Conversely, if you have a fifteen year, you're paying IT back in half the time.

So if you're flush with cash and you can afford the significantly higher payment, great, you're going to save a tremendous amount in interest over that fifteen year period. tremendous. But your payments can be significantly higher. So whether not you can afford IT is.

you know a case by case. okay? It's just begging of your former life. A Morgans broker can help you buy a house. If you have in my credit situation or weird financial situation to their trend.

I would say that meeting with a mortgage broker early in the home buying process is critical because what they're going to do is they going to take this very blurry picture and help bring IT into focus. One of things i'll do is there, look at your credit.

So if your credit is, I think, to use your very technical term, then yes, they should hopefully a credit repair specialist that they can refer you to IT can be dicing in terms of what they can actually do, how quickly they can improve IT. And there's no guarantee, right? There's three different credit bureaus. And if you pay off this line or pay down that line, how much would affect your credit, they don't know until they rerun IT. So if you have things that need to be fixed up in your credit, yes, a mortgage broker by proxy can put you in touch with someone that could potentially .

help you with IT and their fees are paid for by the providers.

You're not the mortgage generally, generally that there is a commission that's paid or a percentage of that loan that then it's paid to them. But you can also buy down the rate where perhaps you pay more to get a lower interest rate, but then maybe they have to charge you a point. So it's like anything, there's levers. right? If at six percent with you, with IT, their compensation being paid for by the bank maybe can get you down to five point seven five, but then you have pay point, take out a he lock .

and use IT to put a downpayment on your next house.

That's just a question of leveraged. And that goes back to, again, your very technical term of bird counter for all the others there, where the a whole principle in real estate investing is to, again, buy something, create value, add equity, increase your loan to value position and then leverage that to go by more. You could apply that same principal to a heat ck.

I would just say, be careful, you don't want to get in over your head. And most lenders won't to allow you to that anymore anyways, meaning that they keep the ltv requirements very low or rather very high on the headlock so that they don't allow you to be able to over ever john them. But yes, borrowing against to go buy more. You know, I would say rod favors the bold .

and so as tragedy.

So tragedy. yeah.

Buy a four closed home.

buy a closed home. These questions are so much more nuance than three or trend to buy a four close home like either the court steps are at auction, have to have cash. So unless you have a big pile of cash use, if you if you need to get a mortgage, you're not buying that for a closed home.

You're not getting that, you know that savings. You not realizing that savings or discount will happen is we'll try to sell IT again. I D like the court steps or the actual courts ups.

Well, me not technically outside, but you know they'll try IT like there will be a court dates at a sale date and you can either buy IT there or you can buy IT the auction. And potentially you could realize a significant savings in doing so. You're buying a non contingent.

You have no opportunity, inspect the house, look the hood, kick the tires. You're paying all cash. Few people can play that game. If they're unable to sell IT there, then they hire IT a brother and they try to sell IT IT, whatever the market value is to try to recoup, you know, whatever their losses are on .

the a two one. Buy down is a great way to make your mortgage more affordable when you buy.

Yeah.

that's truth, as you know. How do we under episodes? You could do this by now.

Totally forgot. I remember this. Okay, john, as you know, I am all my episodes. By asking for one tip, listeners can take straight to the bank. Can you share one thing people can do to help navigate this crazy real estate market? Oh, boy, I probably give you the same answer.

I think times if you asked me the same question, which I don't remember, don't go IT alone and I think I am saying them having some days of, so I may have given the same answer, don't go IT alone. You're not meant to be a real expert. That's that's why I exist.

That's why I have a job. So please don't take IT away from me. You know it's the way is the reason that financial advisers have a job, right?

Like I I keep tabs on my investment portfolio. I don't manage. I know what I know.

I know what I don't know. These are chAllenging times. There are uncertain times. And I think, as I said before, all real citizens are not created.

This about one point three million in the united states right now, which just as an interesting stat, there's about nine hundred thousand lists available for sale. So there's more real estate agents in this country than there are. There are roughly about nine hundred thousand homes available for sale relative to one point three million agents in united states.

There are more agents in this country. There are active listings available and that's up significantly. We were down to around four hundred thousand active listings a year ago. We saw seventy, seventy five percent drop off and we had experienced previously. But that drop off was from an anomaly, which was cover times.

What we really need to be doing is fairly comparing to like the two thousand and eighteen market, not the two thousand twenty one market, but that's the home of the story and that's not answering your question. So yeah, I think it's really important actually. I'll give you one other stat as IT relates to this because IT IT does tian, fifty percent of all agents sold one house or less last year. Seventy percent sold five houses are less last year. Alive yourself with someone is a true professional in what they do in everything, real estate investment, whatever, because that's who you need to help sort of steward through this process.

Money we have is a production of money news network. I'm your host nickle lap in money rehabs executive producer is more can the void our researcher is Emily homes. Do you need some money rehab? And let's be honest, we all do.

So email is your money questions, money rehab at money news network up come to potentially have your questions answered on the show or even have a one on one intervention with me and follow us on instagram at money news and tiktok at money news network for exclusive video content. And lastly, thank you so seriously, thank you. Thank you for listening and for investing in yourself, which is the most important investment you can make.