EP #4 - Current State of the Housing Market

In this episode titled "The Current State of the Housing Market," Jacob and Mike provide a comprehensive analysis of the real estate landscape. They delve into surging demand's impact on affordability and stress the need for a long-term investment perspective, highlighting the significance of location in real estate success. Turning their attention to interest rates, they offer practical advice for thriving in a high-interest-rate environment, debunking misconceptions about a housing market crash. They discuss the ongoing inventory shortage and its effects on prices, and they provide sustainable rent growth projections and tenant attraction strategies. The episode concludes with a compelling call to action for investors to remain active and make informed decisions in the dynamic world of real estate investment.

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Transcript

Nancy: 0:00

This is the Financial Freedom Fighters Podcast

Jacob_Episode4: 0:13

Mike, we are live with episode four. Welcome everybody to the financial freedom of fighters podcast. My name is Jacob Sandoval. I have my co host with me. He is the best realtor in Cleveland. Mike Magno. How's it going, Mike? How you doing?

Mike: 0:30

Jacob, I am good. It's a victory Monday here in Cleveland. You can see on my shirt here with the Browns

Jacob_Episode4: 0:37

There you go. There you go.

Mike: 0:39

had a, we had a really nice showing after that debacle in Pittsburgh last Monday night.

Jacob_Episode4: 0:44

another thing to celebrate our podcast says, uh, Eclipse over a hundred downloads, If you guys are listening to this podcast, thank you very much. Mike and I had, you know, low expectations, especially with the first couple of episodes, but, um, it surpassed our expectations so far and got to celebrate the small wins. Got to celebrate the small wins

Mike: 1:03

Absolutely. Congrats. I, uh, I, Hey, I just like doing this. Right. I, you know, I don't really, we get a hundred downloads, 200 downloads, whatever, you know, hopefully organically we'll grow and we'll be able to reach people and, um, do, do some good in the world.

Jacob_Episode4: 1:18

a hundred percent, a hundred percent. So to break down the episode for today, folks, Mike and I are jumping into the current state of the housing market. It is a very, very interesting and kind of weird market that we're operating in right now. There are a lot of competing forces. It's really hard to know what is the right move to make. So thinking from the perspective of a beginning investor, it's really important to try to understand what is happening in the market, both at the macro level, and then ultimately what's happening in your kind of local market that you're investing in. I want to preface this by saying that Mike and I are not economists, you know, we don't have fancy economics degrees and we are trying to make sense of all this stuff just as much as you are. So we are kind of dubbing this episode, the current state of the housing market. Newbie edition, right? We are trying to put everything in layman's terms and trying to relate it back to you, the person that's out there trying to find their first deal. Right? So we're gonna break down as much as possible what we understand. We'll talk about the housing market, some of the key metrics that you should think about when assessing the housing market. And then Mike will obviously bring in his, local market knowledge to talk about Cleveland specifically. So anything to say, Mike, before we kind of jump into this episode?

Mike: 2:39

yeah, I, I think it's, it's very cool, um, looking at some of this, this data, right. kind of diving deep into it and you and I focusing in on like, what does this mean? And then put it out to the people, understand it right. And what, what it means to them as. New investors who try to, learn investing, right?

Jacob_Episode4: 2:57

Yeah, absolutely. And pay attention as we kind of go along folks, because Mike and I will also. Point to specific data that really dispels some of the false narratives, I think. Okay. That are kind of being peddled around the real estate industry right now, particularly people that are fascinated about the quote unquote crash that's coming for the real estate market. And if you know anything about the real estate market and if you're staying active and looking at the data, looking at the numbers, you know that a crash in the sense that these people are talking about a crash is. Unlikely, right? And so we'll kind of point to those things specifically, but we'll just jump right into it. So the first part of this, Mike, I want to talk about what's happening at the macro level. And so before jumping into. The housing market specifically, we should zoom out a little bit and just think about the nation's economy as a whole. And what I've really enjoyed about being a real estate investor is it forces you to think about the economy more broadly, right? Because a lot of what's happening at the national level impacts and trickles down to the real estate market, which is a market that we all care about. So to zoom out, I think is very helpful. What do we mean when we talk about what's happening at the macro level, right? So let's just talk about the first thing, Inflation, if you have been staying on top of the news at all, you have heard about how inflation is running rampant in our economy and almost got as high as 9 percent inflation, not too long ago. And so let me break it down, the way that I understand inflation and why it's bad for our economy and why. The federal reserve has been so focused on getting inflation under control. very simply inflation is measured as the increases in prices that we see year over year, how much more expensive are things getting for consumers in the United States? And this is important because we want to make sure that prices aren't outpacing how fast wages are increasing. Because if we're in a place where prices are increasing 9%, but wages are only increasing two to 3%, then things are just becoming less affordable for people in the economy. And that's not a good place to put people in. And so that's why the fed is hyper, hyper focused on getting inflation under control because when it was at 9 percent and growing, it could easily get out of hand. Anything else to add kind of on the inflation piece, Mike?

Mike: 5:28

Yeah, I mean, you know, for, for the listeners out there, everything's more expensive, right? Like we're all dealing with it. You go to the grocery store, you go to the gas pump, you go to the Home Depot. I mean, everything is more expensive it's. It's unbelievable. Right. And you know, for those who want to get in front of it, this is the stuff that they need to kind of learn about when it comes to, you know, how do I invest my money? Because it's, being eroded at four, a clip of four or 5%, right. If you leave it sitting in a, in a savings account at your local bank at two or 3 percent and the inflation's at four or 5%, You know, you actually lost one or 2 percent year over year. So, you know, getting into, tangible hard assets, real estate being one of those types of assets, stocks being another one of those assets, where you can invest your money and hopefully it grows at a higher rate than we're seeing it eroded from inflation.

Jacob_Episode4: 6:24

Yeah, absolutely. So as of this recording, inflation has come down. at its peak in June of 2022, we were about 9 percent inflation. So that means prices. Across the board, we're increasing about 9%, which is a ton. A ton. The Fed's target rate for inflation, the Federal Reserve, their target rate for inflation, like a healthy amount of inflation is 2%. That's their target. That's what they want to get to. From June 2022 to now August, 2023, we've gone from 9% to 3.7% inflation, which is obviously a huge, huge decrease, right? So we are making progress on the inflation front. But the job is not done. to get from 3. 7 percent all the way down to the target percent of 2 percent for the Fed is going to be extremely, extremely difficult. And so to take a step back, how does the Fed combat inflation? They don't have many tools, but one of the main tools that they have to combat inflation is playing around with the interest rate. if you think about the federal reserve as a bank. If we think about them as a bank, the interest rate or the federal funds rate that the federal reserve is setting. Is basically the cost of borrowing for all other financial institutions. So it's the cost to borrow. Those financial institutions who are then lending money to businesses, to consumers. They're obviously going to have to put a premium on top of that rate, right? So if the fed is increasing interest rates, which increases the cost of borrowing for these institutions They're gonna pass that increased costs on to the consumers on to the businesses on to the people that are actually borrowing the money So by increasing the rates, borrowing money just becomes more expensive Across the board, business loans, mortgages, credit cards, everything, everything becomes more expensive to borrow, which puts breaks on the economy because people can't borrow money and borrowing money. Like we said in the last episode, right? My credit makes the world go around. If the credit is not flowing as freely. The spending is going to halt, which is then going to hopefully fight that inflation, right? Because the prices and the spending and everything is not being driven so wild. So that's my understanding of interest rates, Mike. I don't know if you have anything to add kind of on the interest rate side

Mike: 8:43

you know, it's just, it's just important to understand that As the Fed is toggling their one mighty lever of interest rates, it's going to cause stress to the system. they are trying to cause our economy to, to crack a little bit. is what they're trying to do. And they're, trying to get the housing prices to come down. and how do they get them to come down? Well, by increasing supply, they're hopeful. But That's not happening now, You know, the problem is we're going to talk about a little bit later in the episode, but this whole lock in effect of the low interest rates, versus where they're at today, because you've got all these people who are locked in and we had such low interest rates for so long.

Jacob_Episode4: 9:21

Yeah. So to close the loop on interest rates, folks, the federal reserve is going to increase interest rates when they want to slow the economy down, right. To fight inflation, they are going to decrease interest rates when they want to stimulate the economy. So when COVID 19 happened, they dropped interest rates. Basically to zero because the economy was in a state of shock, right? Unemployment jumped up incredibly high People didn't know what was going to happen. And so the fed to stimulate the economy. They brought rates down to historic lows Which made borrowing extremely cheap and that stimulated the economy and they kept rates really low for probably too long And that's why inflation got super out of control But the main point here the fed fights Inflation by increasing interest rates and then they stimulate the economy by lowering interest rates That's where we're at right now. The fed has increased interest rates dramatically in an attempt to bring down inflation and they are succeeding in that, but we're still kind of amidst that fight of inflation right now. The fed second mandate is to keep unemployment low so they want to keep inflation under control and keep unemployment low. And sometimes those two things are counter to each other because to Mike's earlier point to fight inflation, they need to increase interest rates and cause the economy to crack a little bit. So we're in this weird spot where the fed is actually trying to increase the unemployment rate, because that is going to help us fight inflation overall. But the United States economy is proving to be incredibly resilient. As of this recording, the unemployment rate is only three and a half percent, which is. Really, really low, And even though that's increased slightly, economists expected the labor market to start to crack a little bit more and it just hasn't. whether or not that's going to hold we'll see, we'll see how that unfolds, but that's just another wrinkle to the economy to kind of round it out as well, one measure of the health of the economy, gross domestic product. Effectively just a measure of all kind of economic output in the economy. If this number is growing, that means our economy is growing. if it's negative, it's obviously contracting or declining as of right now, the most recent kind of quarter over quarter GDP increased by two and a half percent, right? So that means that, in the most recent quarter, the United States economy grew by two and a half percent and. This is pretty healthy growth, For economy of our size. And so all this to say, ladies and gentlemen, it's a weird time. It's a weird time. The high interest rates to combat inflation is starting to cause cracks in the economy, but the labor market is staying resilient and GDP is still growing. Now, there is a world where if the rates stay higher for longer, or if the federal reserve continues to actually increase, things will start to break down and things will actually crack So that's, that's kind of where we're at. Hopefully we didn't go too long into kind of the macro perspective. Again, this is really important to understand because all of these things have such a big impact on the housing market And you should get in the habit as a beginning investor to just be keyed into what's happening in the economy, because it's going to make you a better investor overall. So we'll switch gears, Mike, from a macro perspective into more of a micro housing market perspective. And this is kind of where we'll talk about all the key areas, the key metrics to assess the housing market as we stand today. I'll pass it over to you first. Interest rates, interest rates on mortgages. Where are we at today, Mike, with the interest rates?

Mike: 12:58

yeah, so interest rates, boy, I remember never thinking we'd see 7, 6 or 7 percent again. But here we are, before we hopped on the recording, one of my lenders sends out a weekly text with current interest rates in that text, the average 30 year fixed rate in the U. S. was 7. 22%. And that's for an owner occupied property. And typically you can always add at least a half a percent to a three quarters of a percent for an investment loan. So you're, I mean, you're creeping up at eight for sure. So it's, um, you know, and what's complicating that is you'll, you'll hear like my parents will say, well, when I bought my first place, it was 18 percent interest. Yeah, that house was 40 grand. You know what I mean? So I, I, I, I feel the stress, right? Like we all feel it, it's making everything more expensive, I don't remember the statistic but average price of a single family home in this country is up over 400, 000 today. So, you know. When you move the interest rates in basically 14 months from three to seven, seven and a quarter, like you have now over doubled the cost to borrow. I mean, it really, really makes it difficult for people.

Jacob_Episode4: 14:17

you touched on it, Mike, but the way that this manifests for the investor is your debt service expense. It's just going to be much, much higher, right? It's making that property much more difficult to cashflow when your rate has gone from 3. 5 percent to 7. 6%. And that's going to make deals, not pencil, plain and simple. But on the flip side of that though, is it is keeping some buyers, some buyers, On the sidelines. Which is making things a little bit more balanced. And so Mike and I were just talking about this, but if you can make a deal pencil at 7. 6%, right? And that was the interest rate that I actually locked in on my triplex was 7. 6%. When I tell people that I locked in a deal at 7. 6%, people are like, how were you able to do that? And my response to that is the deal still cash flows. At that rate, it doesn't cashflow a ton. I'll be up front, it doesn't cashflow a ton. But I don't need it to cashflow a ton right now. Because I know when rates eventually do come down to 5, maybe high 4s, I don't think we're ever going to see it sub 4, sub 3 ever again, but If it, if it comes down to the fives to the high fours, right, that's a smoking hot deal, the deal that I've just gotten, but I locked it up. I locked it up at 7. 625 and I'm going to hold on to it until the rates get back to the levels that are more palatable and then I'll refi and then I'll be cash flowing strong, but I wouldn't be able to do that if I waited to buy that triplex when the rates came back down to the force. Because what would have happened, there probably would have been 10 more offers on that triplex, they would have been way over asking. And then my debt service is probably going to be the same because I locked it at much higher acquisition price. So all this to say, Mike, and I think we're aligned here is that interest rates matter of course, but in the longterm, they matter a lot less because if you are a longterm investor, which Mike and I both are, and we are both proponents of being longterm investors. The rates are going to change, the rates are going to be fluid, right? So lock in a good property and make sure it's still cash flows at today's rates. And then when you're able to refi, it's a cherry on top. So that's the first place we start right now, right? And that's the thing that you probably feel the most as a home buyer or an investor is that rates are high. And they're probably going to stay high for a lot longer than we want. And that's making it tougher for deals to pencil, but not impossible for deals to pencil. Right. Especially if you're focused on areas like ours in the Midwest, where the impact on a rate change, especially if you're talking about a hundred thousand, a hundred fifty thousand dollar properties, it's not as drastic as, you know, more expensive property. So not impossible. But just have to run your deal analysis. Like we talked about in the last episode. So that's it on rates, right? And rates have a flow through effect to obviously prices prices. Right. And this is kind of where I want to talk about the housing crash people that are like, I'm going to stay on the sidelines until housing prices bottom. I have some news for you guys. I think maybe the housing prices have already bottomed and we've only declined nationally about 3%. 3%. And that's not a ton, obviously. And there's, there's great reasons for that. And Mike and I will get into that, but the people that are waiting for the housing market to crash are going to be waiting for a very long time because you're not looking at the data. This is not 2008. Mike, you want to touch on that.

Mike: 18:02

Yeah. So I mean, what, what we're seeing is, prices are, staying up, they're increasing. you know, just to give one quick number for people on perspective. You know, the average sale price in my market in September of 2018, so five years ago. average sale price was 100 and just under 136, 000. And in that same month, there were just over 27, 000 homes for sale. Fast forward to today, the August statistics of 2023. So five years later, the average sale price in my market, 200, 000. And the inventory. Is, uh, just under 14, 000 active listings. So inventory is down 50%. The prices are up 50 percent in five years. you don't have to be a genius economist to figure out what's going on there.

Jacob_Episode4: 18:57

yeah, so Mike kind of spelled out what I feel we should all intuitively understand is that price. It's a function of two things, a function of supply and a function of demand. What's different as Mike touched on earlier about the 2008 market and the market that we sit in currently is that in 2008, there was too much supply, way too much supply right now in the market that we're sitting at today. There is not enough supply. There is not enough inventory. And that is what is keeping prices where they are right now. That's what's preventing prices from actually decreasing because there's just not enough inventory to support it. So I just pulled it up right now, looking at Redfin data, the median sales price nationally is 422, 000. So we had a slight dip, right? We dipped to about 382, 000 in January of 2023, but now. Looking at July, we're back up to 422 approaching all time highs. So we had a small dip. But because of the low inventory and people are getting used to the high interest rates, the prices have are starting to climb again. So again, the do not wait for a crash without understanding that there's no inventory to support a crash. There has to be a ton of inventory flooding the market for there to be a crash. And I don't know about you, Mike, I don't see that event happening. Uh, just like this massive flood of inventory.

Mike: 20:29

No, not even with, foreclosures, right? Because people have, because the byproduct is now equity, right? If the Fed continues to put pressure on, on the cracking of our economy, could, could prices go down next year? Yeah, absolutely. They could. You know, how much are they going to go down? They're not going down like we saw in 2009, 2010, right? you know, the, the numbers just don't add up. you mentioned it earlier, depending on what publication you read, we are millions of homes to the deficit. We don't have anybody building. Starter homes anymore, right? The big national builders, the, the Ryan's, the Pulte's, the Lenar's of the world. They're not building starter homes anywhere. They're building big subdivisions in the suburbs, right? And we need the starter homes, right? One of the reasons that personally I target in my rehab business city, the city, I target that on purpose. it helps me feel good about what I'm doing and the product that I'm putting out for people because I'm rehabbing homes. And my last flip I sold Jacob, I sold her for 117, 000 dollars. I mean, we're talking. There was no stone unturned, new roof, new driveway, new kitchen, new bathroom, paint, flooring, appliances, brand new central air, brand new furnace. You know what I mean? And yeah, luckily I can do that and I can still make a profit. But it, you know, could I make more profit somewhere else? Yeah, I probably could. But I appreciate what I'm doing with those properties and targeting these smaller single family homes because we need them for people.

Jacob_Episode4: 22:09

yeah, and I want to re emphasize a couple of points that you made there because you made a couple of really great points one In 2008 the housing market crashed it sent the rest of the economy into a crash and as a result of that builders We're out of business. They just stopped building for years, for years. They just built nothing, but the population of the United States was continuing to increase the demand for homes was ramping back up. Builders still just were not building. And what created, what was created was the deficit that Mike's talking about. And we're anywhere from three to 7 million homes, short nationwide. And that's also why the prices cannot fall because there's just not enough homes for sale. There's too much demand and there's not enough supply. So again, if you're waiting for a crash, it's just not likely when you look at the data in that way. to kind of round this out with some hard numbers, because we talked a lot about inventory pre pandemic. So pre pandemic, so pre COVID 19, there was about 1. 6 to 1. 7 million homes listed. On the MLS nationwide, 1. 6 to 1. 7 million. Today, if you look at the data, we're at about 800 to 850, 000. So less than half of that nationwide. That's what's active on the market right now. Less than half. So to kind of emphasize that, like that's where we're at from an inventory perspective, anywhere you go in the market, you're, you're going to feel that you're going to feel that it's difficult to buy a home, whether you're just a person looking for an owner, occupy home or an investor looking for a property, you're going to feel the inventory crunch right now. And what that also is leading to Mike is. What I will say is that if you want to call a crash where there has been a crash is in the transaction volume The number of deals being done in this market right now is where we're seeing massive deceleration And so the number I have quoted here is that we're seeing about a 20 percent decrease in transactions nationwide for a market and Mike you being a realtor You're obviously feeling this, um, in the number of deals that you're doing and the number of deals you're able to, to kind of lock in for your clients. So you want to speak on kind of the transaction volume dropping off.

Mike: 24:50

Yeah, I mean, you know, nationally, we've been in what's deemed a seller's market since 2013 nationally, and the way that we as agents in our industry measure that is by the, uh, what's called an absorption rate. So that's it's measured in months of inventory and how many months it would take to sell all existing inventory if no inventory new properties come on market. And at the peak in 2020 nationally, we, we sold over 6 million homes and that number is going to dwindle down to just over 4 million homes sold this year. And that's, I mean, that's a huge drop off, huge drop off. typically what they say is between one to four, uh, one to five months of inventory as a seller's market, you know, five to seven months as a balanced market, more than seven months of inventory would be a buyer's market. I'm looking at the statistics of this year so far. back in January and it was 40 days to sell a property. So, and it's down to 23 days here in September.

Jacob_Episode4: 25:55

I love the, I love the days on market metric, Mike, and I want to actually have you explain that a little bit more just in case they kind of missed, missed that first explanation. But. To me, it's a very helpful metric to understand the rate at which things are moving.

Mike: 26:11

Yeah. So, you know, days on market is basically how long it takes the property to, you know, go under contract and sell. it can be manipulated a little bit because different markets have different statuses in their MLSs, et cetera, et cetera. You know, in our MLS, if we change the status to contingent, the days on market continue to accumulate. If we change it to pending, it, it stops accumulating. So that's when it stops the count.

Jacob_Episode4: 26:34

yeah. And the other thing I want to highlight about days on market, which I think is interesting for kind of the beginning investor is you can use that data point and apply it to your strategy. Mike was talking about some deals that he locked up for his clients just this past weekend and, half the deals, were properties that have been sitting for more than 21 days or more than 30 days, right? And. And so you can start to use this data point to inform, okay, I want to target properties that have been sitting because maybe there's a deal there, or maybe there's a problem to be solved there. And so that's, that's another reason I really like it. the last thing I want to kind of touch on Mike is, for inventory to grow or for inventory to be balanced, we need sellers to list, right? We need people to actually list. Their properties on MLS to be sold. And what we're seeing right now is no one wants to list. No one wants to list because these are the same people that have 2. 9 percent interest rates on their primary home. And why would anybody give up that interest rate, right? Why would anyone give up that interest rate to become a buyer in this market where interest rates are above 7%. this is the lock in effect that people talk about. The lock in effect is saying, I do not want to list my home with a great interest rate to become a buyer in a market with very high interest rates. And so all these properties that would be listed are not being listed right now. And that is also contributing to the inventory problem because we're just not getting the listings that we normally would. Anything else to say kind of on the lock in effect and the new listings Mike.

Mike: 28:14

Yeah, I mean it's, it's, it's really wild if you look at the numbers, and I'm doing some quick calculations here just to give some substance to this, but if you bought a 300, 000 house with 5 percent down, At a 3. 75 percent interest rate, okay, your principal and interest payment would be 1, 320. If you take that same loan today at 7. 25%, your principal and interest goes up to 1, 944. So that's an increase of about 50 percent in your principal and interest payment, um, by, by raising the rate from 3. 75 percent to 7. And what's happening is that 300, 000 house that someone bought three years ago, it's not even worth 300, 000 anymore. It's worth 400, 000 today. So they certainly don't want to buy a 400, 000 house at 7. 25 percent because now their payment would be, you know, uh, let's do a quick, change on the calculator here. That principal and interest payment now goes all the way up to. 2, 592 with a 400, 000 house with 5 percent down. So, I mean, you're, you're basically doubling your, your housing expense, which that's a problem. that's the other big issue here in the country. So, you know, you've got, you know, anybody who bought or refinanced between 2020, 2021, 2022, until the Fed started raising rates. So, basically, probably until about Thanksgiving last year when the, when the rates spiked. It's going to be a long time before those properties ever come back on the market. If they ever come back on the market.

Jacob_Episode4: 30:02

This is a really important kind of concept to understand, especially in our markets today, that there's a little bit of a stalemate, right? Sellers don't want to list, affordability issues are kind of plaguing buyers right now with high interest rates. And ultimately something's got to give, right? There's going to be movement. There's going to be movement, but right now that's kind of where we're at. the last kind of. Metric that Mike and I want to touch on with respect to the housing market is rent. Rent is obviously a critical metric for you, the investor. And so it's important to kind of touch on where rent is right now and the kind of movement that we've seen for the past few years as a result of the pandemic and very similar to prices. Rent skyrocketed, during the pandemic and you saw, depending on which market you were looking at, very, very rapid, rapid acceleration in rents, like 15, 20%, 30 percent year over year growth in terms of the rent And I think the main point that we want to highlight now is that growth is not sustainable and we're already seeing that kind of taper off dramatically in a lot of different markets. And so. So rent is typically going to grow at around the pace of inflation. maybe a little bit more, but typically around the rate of inflation. So two to 3 percent per year. And as you are factoring your deal analysis, projecting out rent growth into the future, right? You're a long term investor. So you want to understand what the rent is going to look like in the future. You should conservatively be estimating two to 3%, right? that's where you should be forecasting that rent growth at. if you are aggressive in your assumptions on rent growth, you could be buying a deal that's not going to work out for you or perform the way you expect it to in the future. And so you'd rather be conservative than, than the other way. Anything else to touch on kind of from a rent perspective, Mike?

Mike: 31:44

you know, don't, don't shoot for the absolute top. dollar when it comes to rent, you want to drive some competition into your rental, um, you know, and get you the best person, uh, or people for your rental, right? someone who's a professional, who someone's going to pay the rent, someone's going to take care of the property, things like that,

Jacob_Episode4: 32:01

to that point, right. If your price a little bit below and, uh, your tenant knows that this is a pretty good deal, it's likely that they'll, you know, extend or live there longer because they know that the other properties that they, they will rent are going to actually be more expensive. So you kind of create this, uh, Longer stay for that tenant, which is ultimately what we want. Right. You don't want people churning in and out of your property every single year. That's a, that's a losing proposition. I'm going to round us out here. We've talked about a lot. and I hope that this episode was useful as you're jumping into your real estate investing career. It's very important to have the ability to kind of zoom out and understand what's happening at the overall kind of macro perspective. but then taking all of that info and then being able to zoom in and become an expert in your market across these specific metrics. and another thing to emphasize is real estate from a national perspective is important, but what ultimately matters is what's happening. In your specific market, what's happening in Austin, Texas right now is very different than what's happening in Cleveland, Ohio, right? Austin is being hit a lot harder from a price perspective than Cleveland is. And so if you're an investor in Austin, you're moving and you're navigating a little bit different. Then somebody that is in Cleveland. And so all of these data points, they only matter because they're supposed to help us make better decisions at the end of the day. one thing I want to add to is Mike and I, It's still very active right now. The interest rate environment is extremely challenging, but like I said, as soon as rates drop, demand is going to flood back into the market and it's going to be an even more challenging market, uh, to operate in. And so if you can stay active right now, I love the Warren Buffett quote, be fearful when others are greedy and be greedy when others are fearful. And there's definitely fear right now in the housing market. So now's the time to be greedy as an investor, if you can, and if you can swing it and if you can be nimble and you can adapt your strategy, you should still be active right now. Um, just make sure that the deal still pencils at these interest rates and you'll be in good shape when the rates do eventually drop. I don't know when they'll drop, but they eventually will. So any kind of parting thoughts as we close the curtains on episode four Mike.

Mike: 34:19

Yeah, a couple, couple things. Um, I meant to get this in earlier when we were talking interest rates. So that's what made me think of it. I have it. here in my notes. Um, for those who think that the rates are going to move drastically down, I have some not so good news for those people. So, uh, from 99 to 2008, the average mortgage rates in the country did not move. more than 1 percent above the rolling average for those that decade. And then obviously we had a catastrophic event, right? You had, you had the banking crisis of 2008, right? And then it reset itself. And then from 2011 to 2020, they didn't move, plus or minus 1% off the. Off the average. And so for those people who think that we're going to see some kind of drastic reduction soon, uh, a little bit weary of that as being your investment strategy. you know, some, some very poignant words came out of the federal reserve meeting last week, which was, Hire for longer.

Jacob_Episode4: 35:20

Higher for longer. We were definitely both in the higher for longer camp. So just buckle up, ladies and gentlemen, get comfortable with these high rates, but don't let it stop your activity. I hope today was helpful. I know it was a lot of information, but I hope today was helpful. Mike and I Wish you the best right now when you're investing and if there's anything that Mike and I can do to help you all please reach out to us. I am Cashflow Saga on all socials. So you can connect with me there. Mike, you want to tell people where they can reach out to you?

Mike: 35:54

Yeah, I'm at, uh, on Instagram at Realtor Mike Magno. Same thing for YouTube. you know, you'll find me.

Jacob_Episode4: 36:00

All right, ladies and gentlemen, that is episode four. Mike and I will see you for episode five. Peace.

Mike: 36:07

See ya.