Jason Hartman and Evan Moffic examine the on-going escape to the suburbs. They discuss the benefits of work from home and learn from home setups. They also look at improvements needed for this set-up and why more people are wanting extra space to accommodate. And for those that are currently renting an apartment in the high-density, urban environments, a move in the direction of suburban-living is looking more and more promising. This trend is being seen with home builders as well as they are seeing sales jump.
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Welcome to the young wealth show where you’ll truly learn how to make, spend and invest money for an awesome life. Get the real life stuff that wasn’t part of your school curriculum. Young will gives you innovative new ways of dealing with your finances, as well as the skills and tools you’re going to need to survive and be successful out on your own. Let the young wealth show your GPS to take you from clueless to clued in. Here’s your host Jason Hartman dunwell
Jason Hartman 0:50
Hey, you want to welcome Evan back to the show. He hasn’t been on for a little while and as you know, he is an investment counselor. If you need him. You can reach out through our website. Or at one 800, Hartman and Evan, we got a few things to talk about. We’ve been putting news into our private group. Of course, the venture Alliance members have access to this. And the Jay Chou members have access to some of this because we put some of these articles in there. So you may be familiar but the New York Times is only two months behind my prediction. And they are reporting that Corona virus escape to the suburbs, the pandemic has convinced some new yorkers that it’s time to finally give up on city living, give up on city living, you know, folks, I’ve said it and I’m gonna stand by this one. I think the world has changed for ever. I am not even making a commentary on how grave a threat or how not grave a threat Coronavirus may or may not be or whether it’s a big conspiracy But there’s no question. People’s psychology has changed. The economy has been damaged immensely from this. And things are reacting to that alone. So you don’t have to have anything else besides those things. And they’re just facts. So Evan, this article, a big piece in The New York Times, let’s let’s dive in. Talk to us about this a bit.
Evan Moffic 2:22
Well, it’s cited a lot of reasons. I mean, we’ve been we were talking about people leaving the big cities, even for the last two years before the Coronavirus for a variety of reasons, price safety, so forth. But now it’s accelerating even more. And this article, what I thought was really interesting is it pointed out things I hadn’t thought of, like, urban university. So one of the things that brought new york so much back to life in the 90s was the rise of NYU, and other cities like Boston, Boston University, universities are hit so hard by COVID-19, that they’re not going to be able to have these huge lecture halls. So another reason the cities did Well has been lost and people want space they want to cocoon. I mean, you’ve been talking about this for a while. But this idea of cocooning and a being in a safe, open environment is even more appealing now.
Jason Hartman 3:12
Yes, you’re absolutely right. You know, back in the 90s I read faith popcorns book. I’d love to get faith popcorn on the show. We have not interviewed her yet. As you all may know, I’m a big fan of futurists. I read a lot of futurist material. Alvin Toffler I’ve talked about the late Alvin Toffler, faith popcorn, john Nesbitt, mega trends, etc, etc. Many there are many others of course, and faith popcorn talked about it in the 90s. She talked about the idea of cocooning. She may have coined that term. And it was it was just based on the idea that people are cocooning in their house, their home is their castle, and back then the great technology that was making that all possible was home theater systems. Okay. People, faded horns big premise was, Why do people need to go to the movie theater anymore? You know, of course, he was right at the time, that was a big thing. But it’s nothing compared to what we have at home nowadays. So, listeners, you know, this is not just about real estate investing. When we talk about this, it’s about a variety of things. If you are in a business or industry that sells things for the home, if you are in the home improvement business, if you’re a contractor, you know, these industries, I think will flourish in the coming years because people are really, you know, they’re just kind of cocooning, and they’re making their homes better. And I’m doing that, you know, I’ve noticed this behavior in myself, like I’ve said before, and I don’t want to sound insensitive to people because I know this is very hard and a lot of people but I personally have really been enjoying my staycation. Okay, and I’m getting a lot done at home. I like it. Okay, I don’t want it to be this way forever. Admittedly. fever is, it’s coming. Okay, but the right now, I’ve been liking it. And so you know, I’ve been buying more home related things, I bought a new piece of furniture, you know, I’ve been buying some more stuff. I’ve been like kind of doing my little minor amount of home improvement. And I think for other people, this will be much more significant than it is for me. And businesses will make money off of this. Businesses that sell home improvement, remodels, additions, you know, the real estate industry, you know, in terms of traditional home sales, when it gets going again, and it is going but it’s going to go a lot more people are going to look for larger homes, more comfortable homes, places where they can really cocoon where they have space for home gym equipment, Home Office. And, you know, if it’s a family, it’s multiple home offices, because each spouse needs a place to work potentially, and each kid needs a place to work to, because there’s gonna be a big uptick in homeschooling. There’s going to be home universities were discovering that the Emperor called the college, the government, university debt enslavement complex, how that emperor has no clothes people can learn at home. And like you said, even the cities, I mean, think about it. Boston within a short distance of the core of Boston, you have 35 universities, colleges and universities. Okay. And that has driven to a large extent the real estate values there that has made Boston a very attractive city. And like you said about New York, same deal. This stuff is no longer the big draw. It’s not that meaningful. People are going to learn remotely. And we’re going to fortunately see a lot of these universities go bust as their enrollments decline, thankfully, as they should, and as we see more scalable online learning that should be almost free. You don’t make college free the way it is. like Bernie Sanders want to Okay, you may call it by using technology that has been available for really two decades now. Okay, can I
Evan Moffic 7:09
let you go? Can I can I let you go on a short tangent here too. I thought I was on a tangent.
Jason Hartman 7:14
But you know, I just, I’m just saying these universities, and I’m noticing that with my own kids schools and with summer camps, there is just a total lack of creativity. And I’ve kind of noticed, especially with the nonprofit, like I’ve noticed with nonprofit camps for for profit camps, the nonprofit camps were the first ones to cancel. The for profit camps are figuring out ways to deliver value to their writing camps to their students. I bet with universities, this has really been this industrial complex that use the power of government to control things. We this may be an opportunity for great schools to figure out creative ways to engage students and parents. Absolutely. Absolutely. And you know gyms are doing that too. There’s this beautiful new gym near my house, it was open for a very short time then had to close down. And, you know, through their app, they have homework out suggestions and stuff, you know, they’re really trying to maintain that relationship with their customers. And you’re absolutely right. Listen, you know, when people don’t have an incentive, when they’re not paid for results, why should they be creative? You know, why? Why should they be the human won’t, you know, look, our brain uses about 20% of the entire energy budget of our body, okay? It’s a brain is a hog it’s a really big processor. And it uses a lot of power. It uses 20% of the body’s power which is a lot for something that doesn’t even move okay. You know, compared to all your muscles and your legs and you know all that stuff, right? So we try to be cognitive misers and having you know, you and I have been studying This a bit lately when we discover when we’ve been studying advertising and copywriting, yeah, story storytelling, you got to make it easy for people. And yes, when you want to deliver a marketing message, that’s what I mean. But on the converse of that is, like you said, Look the nonprofit’s, the big fat professors at the universities that are tenured. They’re not going to try hard. The nonprofit’s are not going to try hard because they don’t get paid to try hard. They’re not at stake you once
Evan Moffic 9:30
in a while you once in a while find an exception. Yes, sir. Ordinary teacher course. But in general, right. I’ve just noticed that one camp we’re looking at for our kids like then all these other camps closed and one of them I saw on the website, they’re they’re outlining everything they’re doing to make the camp safe. They are going above and beyond and I know they’re going to be telling me they are adapting. They’re doing what they have to do.
Jason Hartman 9:53
Yeah, absolutely. Okay, looking at this article a little bit before we move on to the next topic. Okay. I think This would be interesting, okay, people are packing their bags between March 15. And April 28 moves from New York to Connecticut increased by 74% from one year ago, okay, that’s according to a company called a flat rate moving. And by the way, these moving reports are available and I teach that in my creating wealth seminar to learn about migration trends and so forth. And, you know, there’s pro mover.org and u haul u haul is actually a very good website, they really do some nice surveys on this kind of stuff. And in suburban towns, which are not really known for their rental stock, meaning rental stock of homes had huge spikes in activity, which is being driven in part by escaping New Yorkers, according to brokers in these areas. Now, this is the new york times article that i’m i’m quoting from here, okay, leafy Wilton. Is that a person leafy, welcome.
Evan Moffic 11:02
Wilton, Connecticut, right?
Jason Hartman 11:03
Oh, okay. Yes. Okay, sorry. What do I know about East Coast geography, Northeastern geography? We don’t sell much up there. So I don’t know. Okay, excuse me for my grades not
Evan Moffic 11:15
not good rent to value ratios. No definitely not,
Jason Hartman 11:17
for instance experienced 19 lease signings between March 1 and April 29 versus 10 in the same period a year ago, so that’s a 40% increase. Okay. What else do you want to share from this thing? How about West Connecticut? That’s amazing. Okay. In the same area of Westport and nice head sickness board, Martha Stewart lands it with her ankle bracelet had 63 new rentals up from 36 Okay, one year earlier, earlier go while Greenwich Connecticut was at 200 versus 158. Properties included single family houses and condos and leases were sometimes a shame Short has two months,
Evan Moffic 12:02
fast that people are turning their homes into short term rentals. Yeah. I mean,
Jason Hartman 12:06
they’re not the same. Like you were saying about your Airbnb, short term rental that you bought through our network. Not it’s not as short is the typical way we think of, you know, rented for a week or three days. You know, but this is like a two month rental.
Evan Moffic 12:22
Yeah, right. Right. It is it’s nice and you know, this also proves something you were saying a couple years ago about renting has lost its stigma. You know, I mean, yes, people are kind of forced to rent here but no one cares about No, no one cares whether you’re a renter or not in in most neighborhoods, I doubt in Westport, Connecticut. If someone’s paying $20,000 a month to rent a house nobody on the street is going to say Oh, he’s renters are bringing down the value of our homes. That’s not happening. And
Jason Hartman 12:48
yeah, no, that’s that’s totally changed. I mean, it all admit, even myself, you know, back in the 90s. I used to look down my own nose at renters and things Well, you know, like your age, shouldn’t you own a house by now? You know, I really thought, you know, Hey, sorry, you know, that’s the way the world thought back then. You know, it’s like, if you didn’t buy your own place, by the time you were 30 or 35, you were kind of a loser. You know, that was the that’s the way we used to think. But now, you know, renting has totally lost a stigma. Listen, I would rather be renting myself right now. Okay. And I own lots of rentals that I rent other people. Renting is a better deal, the more expensive the home the better deal it is. Even at 55,000 a month like that one in the Hamptons that you posted, right?
Evan Moffic 13:36
Yeah, with the infinity pool. Sounds like a nice, I wonder how much they you know, I wonder what the rent to value ratio and a house a house like that. It’s gotta be horrible. Well,
Jason Hartman 13:45
you know, that house has got to be worth a lot more than 5.5 million. Right. So 55,000 would be 1%. Right?
Evan Moffic 13:52
I guess that’s true. I guess it is a good renter. Well, I know.
Jason Hartman 13:57
It’s a bad rent value, because I’m sure that house was probably 15 million dollars or more. Right? Right, right. You know, it could be it could be 50 million for all I know, right? So they really should sell the house and buy some properties in Indianapolis and little or Little Rock. Well, if their houses worth if their house is worth 20 million, they could sell that house and buy 200. rentals or network, you just go to Jason hartman.com slash properties and they could be happy to and they could have $1,000 times 200 they could have $200,000 a month, approximately versus 55,000 a month because their rent to value ratio sucks.
Evan Moffic 14:34
Yeah. Much more efficient use of capital. Definitely no question about it, folks. Shameless self promotion. Go find that go find those deals at Jason hartman.com. All right. Okay. Anything else on this topic before we switch gears? No, this is I mean, this is just something you’ve been talking about for a while. It’s not gonna end it’s in it. It’s not just Coronavirus this is many other factors. Yeah, pushing this As you always say, put yourself on the same side as the most important, you know, institutions like the government and the Federal Reserve will also put yourself on the side of demographic changes and then make demographic change.
Jason Hartman 15:12
Absolutely, absolutely. So speaking of these changes, homebuilders have seen sales jump, as renters flee small urban apartments. Now, this is Diana olek, one of my favorites, CNBC, and the article is entitled exactly that. This is what I’ve been saying for two months. homebuilders suddenly see sales jump, as renters flee small urban apartments. So they’re getting out of the urban areas with these tiny little places. It’s not very comfortable to cocoon, in a tiny little urban apartment or condo, and they’re moving to the burbs, you know, it’s the same thing. The New York Times article and it says it says in the initial four weeks of the national shutdown, sales of newly built homes began falling. They were down at 5% from the normal spring activity by the fourth week. Now, of course, the traditional home shoppers, they weren’t leaving, you know, nobody was having any open houses. Nobody was showing properties. So of course they’re down. But listen to this in the past two weeks, however, the numbers have started to climb according to and we’ve had him on the show a few times, john Byrne’s real estate consulting, which tracks hundreds of builders nationwide. We’re still down roughly 65% but more positive news is coming out of the new home market particularly for builders, says Devin Bachman, manager at JB RC I just got an email from Gavin. So this is interesting and as these lockdowns lift and people get less concerned, there is going to be a mass like this is this is the 2020 version of The Grapes of Wrath. Okay, john Steinbeck’s famous book, The Grapes of Wrath was about migration. Now, they’re not all going to the same place that time. So it’s different in that sense. But they are going to a diverse set of places that have one thing in common. They’re suburban. They’re places where people can socially distance and where they can get a much larger home where they can feel comfortable in at home. Huh?
Evan Moffic 17:20
Do you think, Jason, that there’s going to be any switch to you know how you’ve had the author of the book state of the states on nerd? Where she down? Yeah. Meredith Whitney. You know, I’m in Illinois. So we are, I think the second or third strictest state. And I’m worried that schools won’t even open in the fall. And obviously, you know, I’m here I’m not moving anywhere anytime soon, but I had the freedom. Why wouldn’t I move to like a state where there’s just, you know, first of all that better weather Aside from that, but where you can, you can have more opportunities. Were there more businesses that are opening up where there’s just, I feel some time now, again, this opening Hands on people’s own individual feelings about Coronavirus. But I’m eager to get back to work to get out again, who fix some, some overbearing governments will drive people out of their states. Yeah. Well, you know, I’d be remiss if I didn’t, if we didn’t talk about Elon Musk.
Jason Hartman 18:16
So Elon Musk has been making noise that he’s going to move Tesla. And he got a response I’m looking at our article says lawmakers response to Musk is brief. And to the point, some point out that it’s harder to dismiss job the jobs Tesla provides, okay, Elan Musk has threatened to move Tesla out of California and one lawmaker seems ready to move on without him leaving little room for ongoing debate. Lorena Gonzalez tweeted late Saturday, F. Ilan musk fvck Okay. The CEO is unhappy with California’s restrictions. It’s It’s just amazing that she would say that that she would actually tweet the F word to Ilan musk. And you know, that’s the attitude of California. You know, listen, I’m I’m no big Ilan musk fan. Okay? No, I definitely will criticize him until the cows come home. But you know in this battle I’m on his side because these politicians they are just they’re just pathetic in California they’re awful. They are so unwelcoming to business they’re trying it’s like a state that is trying to commit suicide it’s absolutely unbelievable I
Evan Moffic 19:34
mean these are good paying jobs I mean I can’t you i was i was listening to a story about Ilan musk to and talked about how you know he has to he has he has so much money and get his employees that are on furlough don’t know when they’re going to be hired back. They’re not making any money and it was just a sad story and I I sympathize, of course with his employees, but these are generally higher paying jobs. So if California doesn’t want them, he’s going to go open up another factory in Reno.
Jason Hartman 19:59
Yeah. And a lot of those people will just move right they’ll just move to Reno or whatever right. It says now here’s what they say in the article goes on it goes. Ilan needs California, then more than California needs. Ilan, what? Are you kidding me? I doubt that. Okay. Another Post said, Tesla has a lot of employees in the state. So what you’re actually saying you meaning you the government is F 37,000 people and their families. That’s exactly what the Socialist Republic of California is saying. absolutely stupid. And folks, every time some idiot in New York or California pulls something like that some idiot politician, it just benefits the type of real estate that you can find at Jason Hartman calm. So I’ll just point that out again. Okay with these homebuilders. I just wanted to play for you a little clip here. That talks About the mortgage market and this issue, so let’s just get this and then we’ll wrap it up.
Evan Moffic 21:07
It will now buy mortgages then go into the government’s forbearance program after they closed that program allows borrowers to delay their payments for up to a year, if they’ve been impacted by the economic shutdown. Now, Fannie and Freddie hadn’t been buying those loans, leaving lenders on the hook. And as a result, lending tightens dramatically. You can see here
Jason Hartman 21:26
So see, basically what they’re doing is Fannie Mae and Freddie Mac, are now acting in a dysfunctional manner to bail out the system. This wouldn’t happen if these weren’t government sponsored entities, okay, it only happens because of this. It’s dysfunctional. Nobody in the free market would do it, but they’re doing it. So go on
Evan Moffic 21:51
how mortgage credit availability tanked in March. Now, there are a lot of factors behind that, but this was just one of them. Fannie and Freddie’s regulators In a statement purchases of these previously ineligible loans will help provide liquidity to mortgage markets and allow originators to keep lending that from Mark Calabria. Now, there are certain
Jason Hartman 22:10
limits of course, of course it will, of course, of course, it’ll help the mortgage market but it just goes to show you that they’re just bailing out every aspect of the system everywhere you look.
Evan Moffic 22:22
Oh, you must have closed between February 1 and may 31 of this year, it can be to buy a home or refi but no cash out refinance alone cannot be more than 30 days delinquent. There will also be a cost premium for lenders to sell these 5% of the loan for first time homebuyers and 7% for repeat homebuyers. There is some disagreement as to what this means for mortgage rates. Some say they could fall slightly as the credit box opens up more. Others say some lenders will pass on those higher costs onto borrowers in the form of higher rate.
Jason Hartman 22:55
So that’s Diana Oh, look at CNBC and there you go. It’s been allows everywhere we look.
Evan Moffic 23:01
But Jason, this is this is I’ve been wanting ask you this question. How is this just going to last forever? I mean, I’m sure that the fact that all these bailouts are delaying foreclosures and the ability for, let’s say, our local market specialists to find great deals, is that are they just delaying it by three months or six months? Or is this just going to continue to happen for years on end? Well,
Jason Hartman 23:25
I guess every bailout, in essence delays the inevitable, which is the collapse of the system eventually. But the difference between my thinking and all of the chicken littles like Peter Schiff, and Jamie, Jim Rickards, and just everything that they’re all out there saying the economy is going to collapse, right? They’ve been saying this for decades, and you’re always wrong. The reason is because nobody knows how long they can keep kicking the can down the road. And I say they can kick this can down the road another 50 100 years. And right The question is Compared to what? You know, yeah, it’s all it’s all dysfunctional but it’s dysfunctional everywhere. It’s not just in the US the whole
Evan Moffic 24:07
nach white market timing doesn’t really work with our, with our approach because we are we’re buying for cash flow and it who okay so maybe it’ll be cheaper in a year but you’re still gonna be collecting cash all
Jason Hartman 24:22
yeah and you know probably the kind of houses we recommend. They’re probably not going to be cheaper I mean, we may see a huge decline in real estate prices. But when you segment that up by market linear cyclical hybrid, and then you you segment by price and you segment by high rise condo versus suburban single family home. And when you do all of that, I think you might see the real dollar prices of our properties go up or at least remains stable in this now right maybe not maybe the economic collapse will be so good. But everything will go down. But then it will kill the buying market and strengthen the rental market. So as I teach in the three dimensions of real estate, as I call it, that strategy of mine that I’ve been teaching for 16 years, the rents the rental market and the purchase market are non correlating. Okay? So when people are forced to stay in the renter pool because housing affordability has gone down, and that goes up by the price but by the payment, okay? So, fee interest rates are up tracked and we’re in bad times or if people don’t view the future, as though the market will appreciate in value. They don’t buy it, they just wait. You know, it’s like, it’s like deflation versus inflation, Evan, look, if you’re if your currency is going down in value, you try to spend it as quickly as possible in an inflationary environment. Because you want to buy your stuff you want to exchange your currency for your dollars for stuff when before the stuff gets more expensive, right actually assets. Yeah. So yeah, especially assets but even just goods that you need, you know, a sofa, whatever, right? But in in, in a deflationary environment, you do the opposite. You get off you wait, you say hey look, it’s gonna be cheaper later. I’m not gonna buy now, I’m just gonna keep renting because I’m gonna wait for the prices to go down. Okay, good luck with that. We’ll take the 20% yield you give us every year, and you keep running fine. No problem.
Evan Moffic 26:36
I like it. Me too. Me too. It’s a plan that works. And it’s really, really see what happens here really is Evan,
Jason Hartman 26:43
wrap it up with any any other thoughts you have?
Evan Moffic 26:47
Well, I think we just showed that real estate income property especially our approach income property is the most durable asset class. It’s not. It’s not going to double your money in six months, but it will build long term wealth. in almost any market environment, and we just don’t know, we don’t know what the future holds, and don’t you want something that has proven returns through all of history, and that’s what we have,
Jason Hartman 27:11
you know, one of the, my very favorite phrases, and it’s from one of the classics, okay? Is the book starts off by saying, I am ready to be the hero of my own life. And that’s what I want to say to all of the listeners, You are the hero of this story. Evan, and I and the rest of our team, we’re here to be your guide, and to help you have a heroic life. And that’s really what this is about. So you’re the hero. We’re the guide. We’re here to help you along the way and give you the guidance you need. So you can build an awesome real estate portfolio so you can get at in state of financial security in a world where the opposite is happening to most people. So fortunately, You found us. You’ve been listening to the show, and we will guide you guide you through these turbulent times. But there’s a lot of opportunity in these turbulent times. All right, Evan. Hey, thank you so much for joining us today.
Evan Moffic 28:12
Thanks, Jason. Thanks for having me.
Jason Hartman 28:14
Until next time, everybody, happy investing.
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