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<v Speaker 1>Welcome to another edition of the Chicks on the Right

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<v Speaker 1>podcast where we talk to our friend and sponsor of

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<v Speaker 1>the show, Zach Abraham from Bulwert Capital Management, And today

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<v Speaker 1>we're going to talk about home ownership because apparently there

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<v Speaker 1>was a recent article that said that buying a home

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<v Speaker 1>now in twenty twenty five is harder than it's ever

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<v Speaker 1>ever been. And in fact, when it used to be

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<v Speaker 1>just five years ago, you needed to have an income

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<v Speaker 1>of about seventy eight thousand dollars in order to be

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<v Speaker 1>able to afford a typical first time home. Now it's

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<v Speaker 1>jumped fifty percent, where you need to be making upwards

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<v Speaker 1>of one hundred and twenty thousand dollars, while wages have

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<v Speaker 1>only climbed around twenty seven percent. So you combine all

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<v Speaker 1>of the high mortgage rates, the high prices, all the

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<v Speaker 1>insurance premiums, the inventory that's out there right now, and

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<v Speaker 1>it's starting to feel I worry for like my kid

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<v Speaker 1>and for other twenty somethings that home ownership is like

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<v Speaker 1>pure fantasy at this point. So what do you think

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<v Speaker 1>about that is buying a home just going to be

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<v Speaker 1>totally out of reach for like my kid, who's going

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<v Speaker 1>to graduate from college in three years.

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<v Speaker 2>No, So, I mean these things occur, right. First of all,

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<v Speaker 2>you got to look at it on timelines. I mean, one

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<v Speaker 2>of the things that you have to think about is

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<v Speaker 2>there's going to be a lot of the baby boomer

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<v Speaker 2>generation is getting older every day, right, and more and

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<v Speaker 2>more of them are becoming retired. I think something like

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<v Speaker 2>eleven thousand of them retire every single day. Now is

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<v Speaker 2>the pace that you're on or something? Yeah, it's pretty crazy,

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<v Speaker 2>But then you think about it, You're like, you know,

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<v Speaker 2>the baby boom regeneration I believe is like eighty million people,

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<v Speaker 2>So you know, it's a big chunk of people. But anyway,

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<v Speaker 2>as they age and as they downsize, as they pass

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<v Speaker 2>away or whatever, or move into assisted living and you

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<v Speaker 2>all that kind of stuff, that's going to free up

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<v Speaker 2>a lot of inventory. But what I do think though,

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<v Speaker 2>is that if you're a if you're younger, or you're

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<v Speaker 2>trying to purchase the first home, the first thing I

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<v Speaker 2>would say is be be very mindful of where you're

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<v Speaker 2>doing them.

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<v Speaker 3>Right. For instance, if I was looking at if I

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<v Speaker 3>had kids that were of that.

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<v Speaker 2>Age now, I wouldn't want them to I want them

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<v Speaker 2>to live right right across the street from us, right,

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<v Speaker 2>if I had my way, But I would tell them, a,

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<v Speaker 2>I don't have a problem with you paying up for

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<v Speaker 2>a home, but where are you going to do it?

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<v Speaker 3>Right?

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<v Speaker 2>Are you trying to do it in California? Well, I

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<v Speaker 2>think that's really dumb for a whole host of reasons,

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<v Speaker 2>not even just speaking politically, right, just economically, I think

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<v Speaker 2>that's dumb. If you were trying to do that around

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<v Speaker 2>where I live in the Seattle Washington area, I think

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<v Speaker 2>that's dumb. I think there are a lot of places,

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<v Speaker 2>specifically a lot of places in the Midwest where I

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<v Speaker 2>think it makes a lot of sense. You know, go

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<v Speaker 2>look at home prices in Detroit and the surrounding areas.

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<v Speaker 2>People are like, oh, it's Detroit, And I'm like, you

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<v Speaker 2>know what, Well, just like everybody forgets that things cycle, right.

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<v Speaker 2>So if we went back to the seventies and we

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<v Speaker 2>said Detroit's going to turn into a ghost town after

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<v Speaker 2>two thousand and eight, like get out of here, right, right.

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<v Speaker 3>If we'd have gone back ten years.

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<v Speaker 2>Ago and said Detroit's probably a great place to buy land,

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<v Speaker 2>people are like, Detroit, it's a black hole, right, Oh.

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<v Speaker 3>Look how much land values have bounced up.

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<v Speaker 2>Detroit is there for all this. You know, Detroit is

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<v Speaker 2>a was a big deal because of where it was

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<v Speaker 2>right located on the Great Legs shipping lanes. All of

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<v Speaker 2>those reasons still exist today and one of our biggest

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<v Speaker 2>macro calls macroeconomic halls is Look, I think you're going

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<v Speaker 2>to see a reverse of what we saw for the

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<v Speaker 2>previous twenty five years, where you saw a migration toward

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<v Speaker 2>the coast.

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<v Speaker 3>Right. I think COVID snapped into that.

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<v Speaker 2>People, Yeah, there you go, right, cod I think COVID

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<v Speaker 2>snapped that, And you're going to continue seeing people pushing

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<v Speaker 2>or if no other reason. And everything feeds into it, right, So,

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<v Speaker 2>like I said, baby boomers retiring, that feeds into it too.

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<v Speaker 3>Why cost a living?

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<v Speaker 2>You can sell your place, you know in the Seattle area,

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<v Speaker 2>move to somewhere in the Midwest and pay cash for

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<v Speaker 2>your new place and stick another foreign brand in your pocket.

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<v Speaker 3>Right, that's right.

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<v Speaker 2>It's tax free by the way, right, So that's a

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<v Speaker 2>big deal. You know, Now you've got a paid off

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<v Speaker 2>house and four hundred thousand sitting there. That's throwing you know,

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<v Speaker 2>at four percent, infrast rates is kicking you at twelve

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<v Speaker 2>hundred bucks a month. Right, So I mean think of

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<v Speaker 2>the think of that swing. Same with young people. Right,

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<v Speaker 2>technology has made work from home so much is so

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<v Speaker 2>much easier. Well, if you're a tech company, or or

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<v Speaker 2>you're any kind of company that isn't you know that

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<v Speaker 2>you don't need somebody geographically there? Think of how much

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<v Speaker 2>more competitive is if you want to hire somebody to

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<v Speaker 2>come work for you in San Francisco, you've got to

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<v Speaker 2>pay them one hundred and eighty two hundred grand just

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<v Speaker 2>get in the door.

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<v Speaker 3>They won't be able to.

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<v Speaker 2>Feed themselves, right right, Well, that tech company can say, hey,

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<v Speaker 2>you can do this job from Omaha, Nebraska, and we'll

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<v Speaker 2>pay you one hundred and forty grand. Well, that guy's

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<v Speaker 2>living like a king in Omaha. The tech company is

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<v Speaker 2>sending saving sixty grand. So my So, getting back to

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<v Speaker 2>your original question, I don't think it's a blanket yes

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<v Speaker 2>or no. What I would say to young people, though,

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<v Speaker 2>is if you look at the experience your parents, For instance,

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<v Speaker 2>if they were looking at what my real estate performance

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<v Speaker 2>has been since my wife and I first bought a

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<v Speaker 2>house in this area, I would look at them and say,

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<v Speaker 2>don't count on a repeat of that for you. And

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<v Speaker 2>part of that is just you're buying houses and a

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<v Speaker 2>record in affordability, right, So it's just.

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<v Speaker 3>Yeah, it's not a good time in the long run.

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<v Speaker 2>So I would say, don't don't press it. Don't feel

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<v Speaker 2>like it's something you have to do. Here's another thing

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<v Speaker 2>that rents have now pulled back down to where they're

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<v Speaker 2>less than mortgages. So are they?

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<v Speaker 1>Because I wonder like and what, so what made that happen?

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<v Speaker 1>Because when we were leaving Indianapolis and there's all these

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<v Speaker 1>new apartment buildings going up, and we were just like,

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<v Speaker 1>what is going on? But then we would look at

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<v Speaker 1>the rent rates and they were insane, insane.

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<v Speaker 2>So again, it's gonna be it's gonna be location dependent,

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<v Speaker 2>right because if you've got a small city and a

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<v Speaker 2>bunch of people that are moving there for a specific reason,

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<v Speaker 2>rents are gonna go up. But generally speaking, rents will

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<v Speaker 2>go down, and they have started receding in most parts

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<v Speaker 2>of the country. And what is driving it is actually

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<v Speaker 2>something that isn't a very positive thing, meaning it's kind

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<v Speaker 2>of something we're keeping an eye on, we're getting a

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<v Speaker 2>little bit worried about, which is there's just been an

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<v Speaker 2>overbuilding of multifamily homes, okay, And the best way to

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<v Speaker 2>describe it, it's different.

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<v Speaker 3>It's not the same thing. But people are like really,

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<v Speaker 3>and I'm like, yes. So a lot of the people

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<v Speaker 3>that got killed.

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<v Speaker 2>In the last downturn in real estate and No Way

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<v Speaker 2>to nine, a lot of that, A lot of those

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<v Speaker 2>folks decided they were going to play it safe and

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<v Speaker 2>not speculated in individual homes anymore.

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<v Speaker 3>But they're gonna do multifamily okay.

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<v Speaker 2>And then as markets went up and more and more

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<v Speaker 2>money started pouring into private equity and things like this,

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<v Speaker 2>you've gotten to the point where we think that there's

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<v Speaker 2>a lot of places where you've overbuilt multi family homes.

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<v Speaker 2>And if you look at what's scheduled to be delivered

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<v Speaker 2>in the next year to two as far as a

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<v Speaker 2>multi family homes, it's going up a lot. So there

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<v Speaker 2>is a backlog. So I think you're going to see

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<v Speaker 2>continued downward pressures on rents generally speaking, and I think

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<v Speaker 2>over time that will be beneficial on the housing market.

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<v Speaker 2>And what I would tell young people right now is

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<v Speaker 2>I would say, look, find the best rent scenario you

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<v Speaker 2>possibly can, and say sack away money and invest money

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<v Speaker 2>and buy a home. When there's a good opportunity. People like, oh,

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<v Speaker 2>you know, well, rent's throwing money away. Anybody that said

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<v Speaker 2>that hasn't owned a home, Okay, because right the reason

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<v Speaker 2>homes are good investments, they're really not when you look

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<v Speaker 2>at the rate of return.

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<v Speaker 3>The reason they're a good.

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<v Speaker 2>Investment is because you lever them, right, So, meaning if

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<v Speaker 2>you just put traditional money into it, it's not a

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<v Speaker 2>very good investment.

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<v Speaker 3>I mean you've got to.

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<v Speaker 2>Pay out, you know, repairs, fixes, property taxes, all these

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<v Speaker 2>other things.

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<v Speaker 3>The leverage is what makes it good.

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<v Speaker 2>So what I tell people is there's a lot of

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<v Speaker 2>economic but you know, for instance, I just moved into

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<v Speaker 2>a new house. It's not new but new to us,

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<v Speaker 2>but moved a new house in February month and a

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<v Speaker 2>half ago. I had to replace a furnace. I was

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<v Speaker 2>twenty grand Yeah, right, Like just that's the part of

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<v Speaker 2>it that nobody talks to you about, you know. So

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<v Speaker 2>there are advantages to renting. And if if my thing

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<v Speaker 2>would be this, if you feel like it is a

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<v Speaker 2>big stretch, if it feels intimidating to pay that mortgage amount,

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<v Speaker 2>if it feels over don't do it.

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<v Speaker 3>Don't do it. That's your answer.

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<v Speaker 2>Right, stay out of that because if the mortgage is oppressive,

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<v Speaker 2>when the repair bill hits, it's it's going to be crippling,

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<v Speaker 2>and you're much better off investing the money, saving and

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<v Speaker 2>waiting for an opportune time because it will come.

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<v Speaker 1>Okay, that's interesting because I wondered if if the rent

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<v Speaker 1>versus home ownership thing was analogous to you know, leasing

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<v Speaker 1>or buying a car. But it sounds like this in

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<v Speaker 1>this situation, because isn't it always better to sort of

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<v Speaker 1>buy the car versus leasing it? Or is it because leases?

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<v Speaker 1>When you lease it, you always have a new car,

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<v Speaker 1>but like you never have any ownership. You're basically renting

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<v Speaker 1>a car forever. Is it the same or are they

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<v Speaker 1>totally different?

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<v Speaker 3>No, there's definitely some similarities there.

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<v Speaker 2>So whenever we're talking about houses and cars, one of

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<v Speaker 2>the things that we have to step back and say is, Okay, Look,

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<v Speaker 2>It's why I hate it when people are like, the

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<v Speaker 2>home's best investment you're ever going to make, and I'm like, well,

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<v Speaker 2>it might be your best investment, but it's because you

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<v Speaker 2>haven't invested well, right, Like you don't, I'd say, like,

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<v Speaker 2>it shouldn't be right if you're going to be at a

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<v Speaker 2>really good spot financially. That should not be the case, right,

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<v Speaker 2>Your four to one case should have done better. But

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<v Speaker 2>the one thing that we have to look at is

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<v Speaker 2>housing and transportation. We have to pay a cost for that,

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<v Speaker 2>no matter what, right, it's a baked in cost. So

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<v Speaker 2>the good thing.

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<v Speaker 3>Is is the house does appreciate in value over time. Right?

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<v Speaker 3>So is it better to own a house than to not?

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<v Speaker 2>Yes?

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<v Speaker 3>Okay? Is it?

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<v Speaker 2>Is it so much better? Are you killing yourself if

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<v Speaker 2>you don't do it? So you're going to put yourself

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<v Speaker 2>in a situation where you know and even if you

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<v Speaker 2>can get financed.

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<v Speaker 3>I don't even know what the financing standards are.

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<v Speaker 2>But is it so important you should put yourself in

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<v Speaker 2>a scenario where fifty five to sixty percent of your

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<v Speaker 2>take home pay is going to pay your mortgage?

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<v Speaker 1>No?

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<v Speaker 3>Okay, like that?

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<v Speaker 2>That's not a good decision, right, So it's not yes,

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<v Speaker 2>own a house at all costs. The benefit of a

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<v Speaker 2>house is when you get to a point where you're like, Okay,

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<v Speaker 2>that's a reasonable mortgage payment. I could pay that, no problem.

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<v Speaker 2>And should I rent or should I buy? Well, you

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<v Speaker 2>should buy because it's going to add up over time,

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<v Speaker 2>and you're gonna get part of the money back, and

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<v Speaker 2>there's tax advantages and things like that.

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<v Speaker 3>But when you're tight, you know, it's you just you'd

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<v Speaker 3>be much.

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<v Speaker 2>Better off fixing yourself financially, saving money, saving for a

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<v Speaker 2>bigger down payment. That's another thing too, save build that

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<v Speaker 2>down payment. When people are people are worried about rates.

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<v Speaker 2>If you're worried about rates, put more money down, save

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<v Speaker 2>more money. They're like, well, we got to do a net.

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<v Speaker 2>Well wait a year, you know, to wait two years.

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<v Speaker 2>Whatever money you put down, you're not going to be

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<v Speaker 2>paying that interest rate on.

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<v Speaker 1>So well, I would think that the fights that Donald

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<v Speaker 1>Trump is having at this point with Jerome, I would

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<v Speaker 1>think we're going to see some rate decreases by the

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<v Speaker 1>end of this year, don't you.

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<v Speaker 3>Yeah. I think you're going to see at least one,

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<v Speaker 3>if not two cuts.

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<v Speaker 2>My guess is is that you're going to see probably

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<v Speaker 2>fifty to seventy five basis points of cuts. Put a

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<v Speaker 2>gun to my head to probably say fifty. Here's the

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<v Speaker 2>problem that only affects the very front end of the curve.

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<v Speaker 3>Right.

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<v Speaker 2>The Fed does not set interest rates on the tenure treasury.

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<v Speaker 3>That's set by the market. Right.

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<v Speaker 2>So one of the things that I think you have

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<v Speaker 2>to be careful on is if you cut rates and

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<v Speaker 2>inflation picks up, it is entirely possible that even though

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<v Speaker 2>you cut rates, mortgages could go the other way. Really, yes, yes,

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<v Speaker 2>And it's something that they need to be very careful about.

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<v Speaker 2>And this is one of the things that I was

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<v Speaker 2>like that if if you put me in a room

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<v Speaker 2>with Trump and I got to tell them something, I'd

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<v Speaker 2>be like, hey, I understand your frustration, and I don't

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<v Speaker 2>think that you're entirely wrong a part of FED policy

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<v Speaker 2>when they cut how they've cut it does smell a

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<v Speaker 2>little bit fishy.

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<v Speaker 3>To be fair to them, though, here are the reasons.

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<v Speaker 2>Why why you can defend what they're doing.

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<v Speaker 3>And he's calling for one hundred to two hundred basis

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<v Speaker 3>points of cuts in an environment where unemployment unemployments at

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<v Speaker 3>four percent. The S and P five hundred is an

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<v Speaker 3>all time high, trading at thirty times earnings, and you

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<v Speaker 3>have record in affordability and housing, right, And the chief

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<v Speaker 3>reason you have record in affordability, guys six and a

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<v Speaker 3>half percent. Mortgages are not historically you know, like usury.

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<v Speaker 2>Right, that is still historically a very low mortgage rate.

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<v Speaker 2>So the reason that houses are i mean, rents rates

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<v Speaker 2>are not helping. But let's also look at what housing

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<v Speaker 2>prices have done, right, They've gone nuts. I mean, you

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<v Speaker 2>had the even including the financial crisis, we never saw

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<v Speaker 2>housing up fifty percent in like an eighteen month period

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<v Speaker 2>of time, right, So you've got to be really careful

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<v Speaker 2>about juicing this thing too much.

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<v Speaker 3>You still have on them.

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<v Speaker 2>You still have inflation at two point seven, right, and

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<v Speaker 2>you got inflation at two point seven with sixty dollars oil, right,

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<v Speaker 2>So you start getting you know, you start cutting rates

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<v Speaker 2>and pushing houses pricings back up, and you get a

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<v Speaker 2>pop and oil all of a sudden, you're looking at

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<v Speaker 2>four or five percent inflation again, and you got to

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<v Speaker 2>raise rates. So I like, I don't completely disagree with

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<v Speaker 2>what Trump's saying. I think there are many things that

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<v Speaker 2>would be aided by lower interest rates. At the same time,

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<v Speaker 2>you usher in some real threats. And if you get

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<v Speaker 2>a scenario where you cut, inflation goes back up and

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<v Speaker 2>the yield on the thirty year goes heads north of five,

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<v Speaker 2>you're in a really really nasty tight spot.

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<v Speaker 1>Well, then to see Trump should be taking advice from you,

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<v Speaker 1>and so should everybody that's listening to this podcast. And

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<v Speaker 1>how can they do that? Zach?

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<v Speaker 3>Yes, I appreciate that. Uh yeah.

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<v Speaker 2>The best way to do it is go to Bullwartcapitolmanagement

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<v Speaker 2>dot com and look for the Know.

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<v Speaker 3>Your Risk Podcast.

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<v Speaker 2>We do a daily show covering everything important that's gone

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<v Speaker 2>on the markets and economics and politics if it impacts

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<v Speaker 2>markets and economics, and goal is to make it twenty

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<v Speaker 2>five to thirty five minutes and you know every single

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<v Speaker 2>thing that you need to know from that day it

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<v Speaker 2>relates to finance and economics.

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<v Speaker 3>So not tough to find is.

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<v Speaker 2>Google Know Your Risk podcast, Lowercapitalmanagement dot Com.

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<v Speaker 1>Always great. I always learn something.

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<v Speaker 3>Thank you, Zach, Thank you so much. Investment advisory services

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<v Speaker 3>offered through Trek Financial loc and SEC Registered Investment Advisor.

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<v Speaker 3>The opinions expressed in this programmer for general informational purposes

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<v Speaker 3>only and are not intended to provide specific advice or

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<v Speaker 3>recommendations for any individual or on any specific security. Any

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<v Speaker 3>references to performance of security so it thought to be

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<v Speaker 3>materially accurate and actual performance may different. Investments involved risk

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<v Speaker 3>and are not guaranteed.

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<v Speaker 1>Past performance doesn't guarantee future results Trek twenty four three

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<v Speaker 1>Zer earlier