Disclosure: The following transcript is from Sachs Realty’s Tuesday Night Podcast broadcasted on Sachs Realty’s YouTube Channel, from November 14, 2023. Some of this content has been modified and please excuse any brevity and any errors which may have occurred while being transcribed by a third party vender.

Welcome to Sachs Realty’s Tuesday Night Podcast where we talk about anything and everything real estate. Each week we deliver expert information, enabling you to make better informed decisions while keeping more money in your pocket. If you’re interested in real estate, this is your show.

Todd Sachs:

I am back in Maryland sitting with Melissa. Were you jealous that-

Melissa LeVie:

Yeah. Of course, I was. I was actually very jealous. You guys had an amazing week.

Todd Sachs:

Oh, my gosh, it was great.

Melissa LeVie:

I know.

Todd Sachs:

People were asking me why I don’t have any sun. We hid from it. It actually rained every single day we were in San Juan, Puerto Rico.

Melissa LeVie:

Lots of rain.

Todd Sachs:

Lots of rain. Guys, welcome to our show. Tonight, we’re going to talk about a whole bunch of different stuff. One of them is that… Yeah, the housing market’s collapsing. Price reduction’s like crazy. I want to show you guys a chart here in a minute. But we are seeing price reductions everywhere. A lot worse than the last time I reported a couple weeks ago. Baltimore City seem to be the worst, but we’re going to go over a couple things.

Also, we want to hear from you guys. Charlton’s already asking how many rents tonight? I don’t know, man. You might have to count them because it might be off the rails tonight. I don’t know. I’m going to talk about some stories, recent stories dealing with agents, what we’re hearing now that the results of the lawsuit are in and the plaintiffs won. The defendants lost. National Association of Realtors and other large brokerages, what that will mean to buyers and sellers. I’m going to give you some of my thoughts and some of the scenarios, but let’s dive right in. So guys, I’d love it if you would kind of hit it up in the comments here in the chat. Let us know what you are seeing in your area.

I have been talking to people all over the country and prices are definitely falling fast. Inventory is shooting up. We’ll also talk about how the COVID forbearance is running out the end of November. We’re going to go over some stats with that. How mortgage delinquencies have shot up, what we’re expecting to see as far as foreclosures. Will we see more bailouts or will we see people finally abandoning their homes and getting foreclosed on? I know it’s not fun to talk about, but hey, I mean, it’s a reality. I think we’re finally here to where we’re going to be waking up from this hangover. Anyway, Melissa, what do you have? What would you like to start us off with?

Melissa LeVie:

Well, we’re doing something really fun tonight. We’re actually sharing the link for this show this evening. So if you guys want to join, you guys have some maybe important questions, what you’re seeing, want some insight, please click the link. We’re going to be bringing some of our audience members in this evening. Also, want to talk briefly about the poll that we have going on.

Todd Sachs:

You didn’t end it, right? Don’t end it.

Melissa LeVie:

It’s still going on. And right now the question, mortgage forbearance ends on November 30th. Mortgage payments restart, December 1st. Will foreclosures rise? You guys, 94% of you say yes.

Todd Sachs:

I think we’re finally going to face the music here. Three years and counting.

Melissa LeVie:

I know.

Todd Sachs:

Unfortunately, there’s a lot of people that… There are millions of people that have actually taken advantage of the forbearance options. I think FHA, they’re still going to… I don’t know, maybe they’ll still work on recasting the mortgages to forty-year mortgages. Now we know that’s a possibility. But let’s take a look. I want to tell you guys what is going on in our neck of the woods here in the Baltimore market. We’re going to go over nine markets that we serve pretty strong.

You’ve got basically 23 counties in Maryland and Baltimore City. So there’s like 24 jurisdictions. But nine of them, we really keep our thumb on the pulse. Here, just take a look at this, guys. I mean, this is now the sellers facing the music. Baltimore City, 47% of the houses. This is approximately a couple percent here or there, but this is as of this afternoon, 47% price reduced Baltimore County, 44% percent, Hartford County, 44%, and Arundel County… I feel like I’m giving the snow forecast, two to six inches of snow. This school system’s closed and Arundel County, 48% of the active listings have experienced price reductions. Howard County, one of the richest counties in the country, 31% price reductions. Montgomery County, 39%, also very wealthy county, PG County, 1116 actives, 45% price reductions. Frederick 42, Carroll 43. Washington D.C., the home of our capital where all the money’s flowing out of 1983 active listings, 45% of these houses have experienced price reductions.

Then we crossed the line. We went over into Loudoun County, Virginia, also a very wealthy area, 482 listings, 36%. Then I figured I’d bring you Philadelphia, Pennsylvania, because that’s a big city, 4470 active listings, guys, 50% have had price reductions. I mean, that is just off the chart. And guys, we’re seeing inventory that is really starting to rise too. I think, Joe, we had a Fred chart maybe on that. You can pull that up. But inventory is just about [inaudible 00:06:38]. What we’re seeing [inaudible 00:06:41]. There’s a couple things going on right now. I want to tell you about a house in a second that I went and looked at today with a client. I’ve been helping buyers navigate through this, and we have a lot of buyers that are very qualified. They have cash, they have down payment money. They’re starting to navigate what do I need to do with these high interest rates in order to get the payment that I’m looking for?

Because wherever we started this, I don’t know, probably post-World War II, we started talking about payments, monthly payments to where the house price doesn’t really matter. So now what we’re doing, again is we’re looking at the payments with the interest rates and saying, “Okay, what are we doing? What can I afford? And what does that house have to be priced at with today’s interest rate?” So what the interest rates are doing, yes, it’s slowing buyers down, but what it’s really making them do is just look at the price of the house. And we see that with these price reductions because the sellers that must sell, and this is going to be a big thing guys, in the next couple months, we’re going to see a flood of inventory hit the market. What’s going to happen is people are realizing that they must sell. And you can only kick this can down the road so far and unfortunately people stay in the house is sometimes too late.

With the sellers now, I mean, yes, they’re having equity still in their house to where they can get out if they’ve owned the house… Didn’t buy the house in the last two or three years, but they’re kind of waiting for something magical to happen. And the unfortunate thing is the people where they’re going to lose their house anyway due to foreclosure, what they really need to do is contact somebody like us or a brokerage in their area and talk about how can I sell my house and leave with something? Because what people don’t realize is now that the delinquencies are going up, they’re ticking up. What people don’t realize is the banks probably aren’t going to give them a second workout. I mean, there’s only so many things that they can do. If you haven’t paid your home payment in six months because of a COVID-19 related issue, financial distress, that’s it. May 31st was the last application date to apply for six months of no payments.

Those six months of no payments are up at the end of this month. So if you’re one of these sellers that’s sitting on the sidelines saying, “My financial picture hasn’t improved,” don’t wait until you get foreclosure sale date in the mail before you reach out to an agent. I went through this back in the 2008 crisis. You need to be proactive and be able to try and walk away with as much as you can before it gets to the point of where the bank is going to take your property back. Foreclose on you. But let’s go ahead. I want to talk about a house that I showed today and-

Melissa LeVie:

I want to hear about the house that you showed today.

Todd Sachs:

I want to go over a house that I looked at today. So I have a buyer that, like I said, this buyer has been great. I’ve been working with them, a husband and wife with kids for several months. We’ve been looking at properties and kind of checking the boxes. So I want to talk to buyers and sellers tonight. Sort of give you my 2 cents of what I’m seeing in the market and some suggestions for you because obviously clearly a lot of people are misguided. They believe that their house is worth a gazillion dollars still.

And like I said, remember what I said, if you want buyers to respond in today’s market, the house price has to come down to the payment that a buyer can afford or you’re not going to sell it, period. So if you’re sitting on the market right now, 30, 45 days, 60 days, 90 days, and it’s not happening for you, chances are, news alert, you’re too high on your price. The buyers can’t afford it in your price range. So I went and looked at this house today, and first of all, I still haven’t heard from the agent. I’ve called the agent twice.

Agents never called me back. This is day two going into day three. Hell, forget today because it’s 8:12 PM eastern time. So I don’t think the agent’s going to call me back today. But the agent is not calling me back. So I got a seller here that can’t sell their house. Worse yet, I have an agent that won’t call me back. Anybody calling about a property that’s not selling, I think your agent better be on the phone calling back any agent that’s calling about the listing. Number one, that’s problem number one. So this house that I went through, met my buyers there today. We wanted to see it in the daylight because as a swimming pool in a hot tub, and of course it was all covered up. The other thing is if you’re selling a house with a swimming pool in a hot tub, I don’t think I would’ve closed it yet. Unless you’re hiding something.

What are you going to do? You’re going to uncover the pool. You just don’t expect a buyer to look at the house with the pool, and they’re supposed to just accept it the way it is and trust that the pictures are good enough. But anyway, the hot tub and the pool were covered up, so we couldn’t see it. Worse yet, well, I want to just walk you down a little history on this house. So in 2014, the house sold for $257,144. We’ll just chart up here so you guys can follow along. In 2018… And isn’t that funny? It sold in December of 14, and here it is. It sold again in November of 18. Weird.

Todd Sachs:

Anyway, closed 11/29/18 for 450,000. Just ignore the next line. It was cancelled. It was put on the market for $625,000 and was taken off the market or 10/27,/23, right? Last month, a day later, it goes back on the market with another broker. So they fired one agent, brought in another agent, and here it’s listed at 595. Here’s the thing, 32.3% increase in five years. So you all might sit back and say, well, that’s nothing. It could have went up 40% in the last two years. Guys, nothing was done to this house. Nothing was done to this house since it was bought in Two-thousand-eighteen, five years later, the people lived in it, scratches all over the floor, holes patched all over the walls. I could go on and on. The listing says as is. I mean, it’-

Melissa LeVie:

In your opinion, what should the house be priced on?

Todd Sachs:

Well, my client thought that it was about a hundred thousand dollars overpriced.

Melissa LeVie:

Okay, okay.

Todd Sachs:

So it’s not an option at this point, anyway. The other thing is it has solar panels. Has solar panels under a lease. If you’ve listened to any of my prior shows, we actually interviewed a guy about solar panels, and I think one of the worst things in the world is a least equipment on solar panels. I think the best thing is to buy them outright if you’re going to put solar panels in your house. But these leases are usually very long. I don’t know. I haven’t seen the lease agreement. I haven’t been able to talk to the agent, so I can’t figure out any of the details on the house. Yeah, I could talk about another story too, while we’re at it.

Melissa LeVie:

Okay.

Todd Sachs:

Well, before I do that, let me just give you buyers some tips here, because when you’re buying a house, first of all, we’ve got a lot going on right now. We’ve got lawsuits that are being filed out there, and I mean, like I said, the NAR and large broker lawsuit, the plaintiffs were successful. A lot of money. There’s another 40 billion lawsuit the first quarter of 24, the attorney that won the last lawsuit minutes after the verdict was written, filed a whole bunch of additional lawsuits on other brokers as well. And there’s a lot going on that regardless of what happens, Buyers and sellers unfortunately are going to have to start better educating them. Well, it’s fortunate, it’s unfortunate that you’re not getting the education from real estate agents that you should have. And that’s one of the reasons why I think so many of you watch our channel because we try and give you good solid sound education advice on when you’re out there looking, what should you do?

But if you’re going to be buying and moving forward, you may not be able to afford. Eventually, a lot of buyers may not get an agent. They might not have the benefit of having an agent at all. A lot of you guys out of pure ignorance say, well, agents aren’t worth anything and it’s not true. And good agents are worth every penny that they make. The problem is we have, the majority of the agents shouldn’t be in the business. And if you’re an agent listening, and if you can say that that’s not true. I just told you I’m waiting for an agent to call me back two days on a listing they can’t sell.

Why should I have to go through that? But what you have to do if you’re going to be looking at a house nowadays is you have to be educated and take the bull by the horns. You have to know what the history is on the property that’s being sold. You have to look and see, has it recently been on and off the market at the very least. But then what else you should do is know when was the last time it was sold. And chances are, if it was on the MLS, even if it was 10 years ago, they probably have some photos online. So it’s really helpful to know what was done to this house. If a house has gone up 30, 40% in five years and nothing’s been done to it, I mean, that’s a red flag.

Most people will not just live in a house. They will fix it up. They’ll update things to their liking. They’ll replace flooring, they’ll replace kitchens. So you have to know, try and get an idea of what was done and what wasn’t done. And really the next thing that you really need to dive into is how many people are viewing the house. Now, I don’t know about all the different states, but I know that are using the Bright MLS in a multi-state, mid-Atlantic region. The agents that are using bright MLS and they’re using something called showing time, which is where you make the appointments. The agent can go on in most cases and see if there’s any showing scheduled. It is important because if you’re looking at a house right now and your agent hasn’t really sold much, they may not know to do this, and they may still think that they can be bamboozled by a listing agent telling them that there’s a lot of competition.

I want to know how many people are looking at this house. So I can go on to the MLS. I can go on to ShowingTime, which is our program that agents make showings through listings, appointments… Excuse me, appointments for their listings. And I can see that there’s nothing scheduled this week on the listing, right? So if I’m calling the agent and I’m saying, “Hey, what kind of activity are you having on this thing?” And they say, “Well, oh, we’ve got showing scheduled like crazy, whatever.” I can say, “Well, I don’t see it, so how’s it happening?” But you need to know that, right? If you’re a buyer, and the other thing you want to pay attention to, is it vacant? Because somebody that has a house that’s vacant has a complete different motivation than somebody that’s going to live there every night, right? The house is vacant, it’s dead expense to these sellers.

They’re paying taxes, insurance, utilities, if it’s wintertime where you are in whatever state you’re in, it’s expensive to heat a house. They have to at least keep it warm enough that the pipes don’t bust and things like that, right? So is it vacant? That’s important. Where’s the seller? Because these are things that you really need to navigate. And like I said, if it’s been under contract recently, then you need to ask questions like, why did it go back on the market? Was it financing that fell through? Was it a home inspection that went bad? Is there a report? Did the sellers do anything? Did they fix any of the repairs? And a listing agent… Which you need to know this, the listing agent, if they know material facts, that listing agent was given a home inspection report. And they know that there are items on there that are safety items.

They have to disclose those to you now, because it’s now a material fact. I didn’t know la, la, la, la, la. I don’t want to hear it. I don’t know, right? But now when I know, well, guess what? Now I can’t unknow. I have to share it. Yeah, there was a problem with the electrical panel. Yeah, there was a problem with the septic. Yeah, there was a plumbing problem. Yeah, they found out that there was a roof leak, there was trusses that were bad, there was bad termite damage, whatever. Was it fixed? So you got to know that if you’re buying a house.

Well, you mentioned people stating where they were from and what they’re seeing in their markets. So I just wanted to touch on that briefly. At the top of the show. I know we had a San Diego comment, and I’m just trying to grab that really quick. Joe, do you see that one-

Todd Sachs:

About the price reductions?

Melissa LeVie:

About the price reductions in San Diego. I know it was at the… Here it is, right here.

Todd Sachs:

What did we say it was?

Melissa LeVie:

We had-

Todd Sachs:

Was 16% or something price reduction. Is that what it was?

Melissa LeVie:

It was 16.5% of the actives in San Diego had price reductions.

Todd Sachs:

Yeah. So I mean, there are some areas that are just being stubborn.

Melissa LeVie:

Yeah. And then we had also some people chiming in here, Cameron, “I went to an open house on Littleton, Colorado this weekend, and no one was there. On top of that. There were four homes for sale on that street, not just one. No joke.” And-

Todd Sachs:

Cameron, thanks for that.

Melissa LeVie:

Yes, thank you Cameron. And then another comment here. “People from California are moving to Vegas, more so than Denver and Colorado now because Vegas medium price home is 420,000.” So I just-

Todd Sachs:

I can remember Vegas back in 2009, 10, 11, man, they had whole streets that were vacant.

Melissa LeVie:

Yeah.

Todd Sachs:

It’s coming guys. Look, it’s coming.

I mean, we just podcasted last week with Mike Maloney in San Juan, Puerto Rico. And Mike was showing charts that… Is showing that the median price to the median income, the house prices need to come down 50% to be in line. And that’s the issue. There’s two issues. Home prices need to come down. I think even if mortgage rates come down a couple of points, it’s not going to be enough because of the amount of debt that people are in and the fact that they’re not making enough money to buy a house, to afford a house. So it used to be you could buy a house three to four times your income, you make a hundred thousand dollars a year, you could easily afford a three to $400,000 house.

Once you start to go beyond that, it’s way out of scale. Now, we’re seeing areas like Boston, Massachusetts, where you have to make… The house is eight times the average income. The house price is eight times the average income. There’s no magic here. When this thing was running up, we knew in the industry. I knew. We were saying this since April of 2022.

So what happens is there’s no magic. Once we start to see where things are getting way out of line, it has to come back in the line. There’s no magic here. So when people are saying it won’t happen, we’re not going to see home prices come down. There is nothing magical about this. It has gotten to a point to where it’s gotten out of line. The problem is that our government, unfortunately has fueled the problem because they don’t want things to crash on their watch. So what they do is they develop these programs to kick the can down the road. Back before 1980, we used to have recessions, depressions, panics, all the way back since just about the beginning of the United States. We would have these breakdowns every two, three years, something we would happen. We’d have a recession, and it would kind of get in line, right?

It would get in line. Well, what happens is when we build these programs to delay things, to extend things, to keep people in their houses, even though it’s not helping them, give us stimulus, even though we’re in now more debt and worse off than we were before, we’ve created so much debt, we’ll never pay it off. So it has to get to these bubbles of such huge proportion that we are starting to see the implosion is much greater, like we saw in 2008. That was just simply because we allowed the expansion of the bubble to burst, to get to the point to where it didn’t make sense. We’re there now. We have banks right now that are losing money every single day with a two and three-quarter percent mortgage rate, or a 3% or 3.5%, right? They’re losing money on that mortgage every single day.

They would probably rather foreclose on the house to get the house back so that they could sell the house, get their money back, and generate a higher producing mortgage that they’re not losing money on. So it’s become to the point right now where the house is not the asset. This is creating its whole other bubble. So people are holding on to dear life because they had this such unrealistic situation to where they could buy more house than they should have been able to. Creating more debt than they’ve ever imagined. Because with a 3% mortgage, I mean, you can buy double what you could today. So they bought these bigger houses, they overstretched, they all went out and bought brand new cars, and now people are in financial trouble. But the handcuffs here are the fact that they’ve got a 3% thirty-year fixed-rate mortgage. That’s their asset. The house is not their asset. The house is declining. The house value is declining. It’s not worth today, with today’s interest rates, the same amount that it was worth when they bought it, they wouldn’t have been able to afford it. That’s the problem.

Melissa LeVie:

And we spoke to one of our lenders today in our referral network, and she even said with the slight dip in the past week of three-eighths of a point-

Three-eighths of a point, that little bit even had an uptick in movement in the market that she saw. And also something to be noted with the forbearance that people’s credit was still showing as paid on time, which is also something that’s very misleading. So now it’s going to come tumbling down for so many people, it’s really on the edge of being very scary.

Todd Sachs:

It is. But like I said, I mean, even with those rates coming down, the house prices are coming down, so it’s adjusting accordingly. The problem is it’s not adjusted enough. So when somebody’s reducing their home price, and it still doesn’t sell with the buyer demand that we have out there…

Todd Sachs:

… doesn’t sell. With the buyer demand that we have out there, that again is signaling the house is still overpriced. Look, you guys may be sitting out there as sellers and be very upset that you’re hearing this. I don’t know what to tell you. I mean, things were allowed to inflate beyond when we get mortgage rates into a normal range and we are now in a normal range. If you look at the last 50 years, to have a 7.5% mortgage rate is not bad. The problem is we were allowed to artificially buy something that we couldn’t afford, and now we have a problem that we’ve got this like, “Oh, my gosh. If I sold my house, I’ll never be able to get all of this for the price.” No kidding. The problem is now you’re stuck in your house because your debt is going through the roof.

Melissa LeVie:

People are sitting on the sidelines. They’re so hypersensitized by what happened in 2008. Then you’re also hearing people say, “When the rate goes down to 5%, buyers are going to be flooding the market again and making it crazy.”

Todd Sachs:

Yeah. Well, like I said, I think we’re just starting to see this. So, in 2006, I think we’re probably sitting right now in 2007-ish. So, I think we do have a major problem. We’ve got a banking crisis that’s going on out there. People are in debt. They’re paying 20% on their credit cards. So, the other thing, before we go any further, I want to just talk about, I said buyer tips. I want to get back to the house that I showed. I want to talk to you sellers out there, because if you’re going to sell, you have to be smarter than your agent unfortunately, which in a lot of cases doesn’t take a lot.

But what you have to do is realize that if there are other houses in your community that are for sale at the same time as yours, I’d ask my agent to take you through them. I would say to my agent, “Can you set up appointments and take me through these houses that are my competition?” Because clearly, in the case of the one I’m talking about today, they didn’t do that because there was a house for sale right next door. The house for sale right next door was tens of thousands of dollars less and it had a pool too.

So, I think it’s important that you know what your competition is as a seller, and you need to make sure that your agents are communicating with other agents that are asking about your property, like for me, for example, which is going to lead me to the next point, and this is going to really upset some agents out there, but look, it is what it is. I don’t want you to just hear this stuff through the news, because I believe if you know what’s going on and you’re savvy buyers and sellers, I’m not worried about my job, because I know what I do, what we do here and representing the buyers and sellers, but I want to just talk about the money side of things for a minute. It’s commissions. We hear that commissions are under attack, the commissions lawsuit.

It’s going to be a lot more commissions lawsuit. Who’s getting paid? How are they getting paid? Blah, blah, blah. Let me tell you, agents are entitled to get paid. The better the agent, the better the pay. I mean, it should make sense that way. Not that they’re making more money, but if they’re good agents and they’re serving people well, they’re going to do more business. They’re going to get more referrals. So, if you’re an agent out there that’s only doing one or two transactions, these agents are probably going to go away.

We’re going to lose that pool of agents out there, because they’re not going to survive. They’re not going to make enough money. It’s funny, I heard… I can’t even. When I’m going on social media and watching or looking at these post that agents make, it makes me want to throw up. An agent posted like, “Hey, you don’t think agents do their job, whatever.” They gave this 110-point literally in this post about everything an agent does.

Melissa LeVie:

I saw the same post.

Todd Sachs:

Here’s the bottom line. What this person was posting was what great agents do every day anyway, but she was making it seem like every agent does this and this is what agents do, which is crap, because not every agent does everything, right?

Melissa LeVie:

Right.

Todd Sachs:

But I want to talk about something. So, I had a deal with a buyer. A lot of buyers, I mean, they’re maxed out, like I said. So, we’ve got a pre-approval, which doesn’t really mean anything, because with fluctuating rates, so let’s just say the pre-approval is for $600,000. That’s great. At what rate? At what day? Blah, blah, blah. What they really are approved for is a payment amount. So, we had to redo, in this case, the bank’s qualification letter to equal the amount that this buyer could pay today. Let’s just say it was $580,000 because that’s what it was. We’re looking at a house that is $600,000. I called the agent up and said, “Hey, we want to try and make this. The client loves the house.”

Look, the buyer can’t afford 600,000 bucks, period. “Well, what can they afford?”, I basically told her, went through the seller, They came back and said, “No, we just did a price reduction.” Okay, have you had any showings? No. Have you had any offers? No. It’s been on the market for months. Sellers moved out, bought another house, dead expense, a very expensive association fees too. That had to be considered. I said to the agent, “Hey, I’m willing to cut my commission. Can we make it happen?” Well, I don’t know what you’re willing to cut it for, but that may not do it. Well, are you willing to cut yours and we can get to the number that we need to get to? No. Now I can’t make somebody cut their commission, right? I just can’t do it.

I can make a decision to cut mine, but I can’t make somebody else make a decision to cut theirs. Well, here’s where it gets interesting. Would you present that to your seller? She told me, “No.” She said, “No.” Well, what? Well, if I present it to my seller, my seller’s going to want me to cut my commission and I’m not ready to do that. She’s going to want me to cut the commission if this deal doesn’t happen on any other deal moving forward. Listen to me. This is something that’s important. Commissions are negotiable, right? I’m not saying if you’re an agent listening to this, you might not want to hear this. People can’t afford the houses that are being priced out right now. We all need to look at everything.

We’ve got lawsuits that are out there. We all need to come together and look at this together and say, “What can we do?” and work together through this. I’m not saying that because you all should be asking everybody to make a dollar, whatever. You guys figure it out. What I’m saying is you have to have conversations with your agents. You have to know transparency and the transaction, because a lot of this lawsuit stuff is a bunch of buyers that are pissed off too, that are looking at the settlement table. They didn’t even know what they were paying.

Melissa LeVie:

I was just going to say they didn’t know.

Todd Sachs:

They didn’t even know what the commission was to their agent.

Melissa LeVie:

No, and they didn’t know that they could have that conversation to be able to get in the house and say, “Would you be willing to cut part of your commission?”

Todd Sachs:

They can always say no.

Melissa LeVie:

They can always say no, but I mean, you should know that you can ask.

Todd Sachs:

100%.

Melissa LeVie:

Yeah.

Todd Sachs:

I agree with that. I think we’re going to see that. We’re going to see that a lot. We’re going to start seeing where, I mean, guys, the buyers and sellers are waking up. They’re getting smart. I don’t have to tell you. The news is telling you and the comments tell us.

Melissa LeVie:

And the phone calls into the office tell us too.

Todd Sachs:

Phone calls into the office.

Melissa LeVie:

And the emails.

Todd Sachs:

Let’s see if we have any questions.

Melissa LeVie:

We do.

Todd Sachs:

I don’t know. Anybody want to come on and talk to us tonight?

Melissa LeVie:

While we’re waiting, see if anyone joins. Question for Todd’s crystal ball, what will future housing look like in residential units, apartment types? My State of Pennsylvania wants “tax breaks” for converting malls into apartment units.

Todd Sachs:

Charleton, I’m glad you asked this question, because we’re seeing what’s happening with office space right now. It’s being converted. Somebody had said, in one of our comments, they had said, “You’ll never convert office buildings.” It’s insanity. They’re being converted all the time. I actually know somebody that converted the old… You’ll love this. … IRS building down in PG County. It just so happened to be down near National Harbor. They couldn’t have timed it any better, but they bought the building and converted it, I think, into 121 apartments, a guy I know real well. He’s developed student housing all over the country, but what happens is this.

Office space or malls, retail space in most areas has a very high parking ratio, way more than you need for housing. I’ll give you an idea. Office, you’re about three spaces per thousand square feet. Retail space, you’re about five parking spaces per thousand square feet. You got to have plenty of parking. Restaurants, same thing. You need a ton of parking for restaurants. But what happens is these buildings are being converted into more of a mixed use kind of a thing where they’ll take the first floor. I was looking at a project in Toledo, Ohio about five or so years ago. It’s an old hotel that was for sale. What was it called? I can’t remember. Lorraine, it was called the Lorraine Hotel. You guys can look it up. Toledo, Ohio.

I was looking to buy that, and they were redistricting, redoing a whole bunch of things in Downtown Toledo. Somebody had bought downtown and they were, like New York City, making a warehouse district, a downtown, a midtown, and an uptown. This property fit right in that, but it didn’t work out for me. They wanted too much money and it was an old building, but anyway. Getting back to this, Charleton, we’re going to see a lot of these office buildings being converted into multifamily space. Now, whether they’ll condo these buildings and sell them off, I think they will. There’ll be a lot of that, even though I dislike condominiums, but as ownership. Oh, there we go. That’s it, man. It was a scary spot. It was wicked, man. It was a weird district, but we were going to do something really cool to it.

It was going to be really neat. We were going to do stores on the first floor, offices on the second floor, and then apartments the rest of the way. We were going to take the whole top, do a rooftop and do penthouse, apartments up top, outside elevator, all kinds of cool stuff, but anyway. It is a very viable option for these office buildings, because it’s a reduction in density. As far as parking, the impact is less. The other thing is that for the developer, they usually have enough parking that they can actually sell a couple pad sites or develop a couple pad sites, put a Starbucks, a Dunkin’, or whatever, dry cleaners, whatever, standalone buildings. So, I think we will start to see that happen more and more, especially as they start cramming us into more 15-minute cities.

I mean, I think that’s going to happen. I think we can see evidence of it. I think with getting rid of fossil fuel cars, we’re going to see where people aren’t going to be able to afford a car. I don’t know how they’re going to charge all these electric cars. I mean, that’s worse. They’ve proven it to be worse environmentally manufacturing these batteries than it is to get fossil fuel or the impact of fossil fuel, but I do. It’s a good question. I think we’ll see more and more of it. I think malls would be converted to other types of things. Maybe community centers with apartments. The problem is we’re going to have a glut of… We’ve got almost I think a million and a half of multifamily units coming on the market. This brings up another thing I’ll talk about.

There are a lot of people, a lot of operators that have collected investors’ money over the last several years promising them high returns, double-digit returns, 9%, 10, 12% returns. They went and obtained their SEC filing information, filed with the SEC, were able to pull money together, and they were buying these multifamily buildings and the apartment complexes. What they were doing is they were pretending like they were the bank. So, part of the problem why the bank is in so much trouble right now is because they use all of your money. So, you go into the bank right now and you put $1,000 deposit in, they don’t even need to keep any of it. It used to be they kept $100 of your money and then they loaned out, created loans with $900 of your $1,000.

That works great until everybody walks in a bank like they did with Silicon Valley Bank and said, “Hey, I don’t trust my money here anymore and I want all my money back.” They don’t have the money to give you because they’ve lent it out. It gets even worse when the people default on the loan that they gave with your money and now they’re in trouble. That’s where the banks are right now. But these operators of these apartment complexes, it’s amazing. People have amnesia. Everything’s exploding. The bubbles are being created.

So, these operators were buying these apartments for the lowest cap rate, lowest returns with hopes that they’re going to make them expensive and they’re going to make them amenity rich with your money, but what they did, because they’re not smart, is they took the money. Some of these operators took your money. They refied the property after they bought it. So, you gave them the money to buy it. The investors gave them money to buy it, then they refied it, took the money and bought something else without you in a lot of cases. Well, here’s the problem. The problem is now a lot of these loans are due. They obtain these loans at 3% and now they want 8. Not only that, but the rent delinquencies have driven the appraised value of these apartments down.

Because remember when I said when a buyer goes to buy something, they’re buying a payment. You live in a house. You’re buying a payment. So, if the mortgage payment is higher because of interest rates, you can afford less house. So, now these investors are going into these apartments and they’re having these conference calls with the investors. I know one, and they’re saying, “We’re in trouble. The bank’s calling the note. We got to refi. We’re going to put it on the market for 40% of what we paid for it.” Some of these are $20, $30 million, $50, $60 million. They’re going to put it on the market because the interest rates are almost three times what these investors originally bought at. The property is worth 40% less. These investors are going to be wiped out.

A lot of them, they’re just going to be wiped out, but what I’m saying is there’s a glut of inventory that is in the pipeline. So, people spend years getting permits. So, as this is all crashing and collapsing, they’re still under construction. The other thing that we’re not paying attention to is a lot of these jobs, construction jobs are these big commercial multifamily buildings. When they’re done, a lot of people are going to lose their jobs. This is a way bigger issue guys than anyone is thinking about, than most people are thinking about.

Melissa LeVie:

Oh, yay. Let’s bring in Charles all.

Todd Sachs:

Charles, what’s going on, buddy? How are you?

Caller:

Nothing much. Just got off of work. If it’s a little too loud, just let me know. I’m driving my V8 home.

Todd Sachs:

You’re cool. Where do you live? Where are you calling from?

Caller:

I live in Southern California.

Todd Sachs:

All right, California.

Caller:

I get emails from my realtor. I’ve been seeing a lot of home decreases. I just pulled up one today. It’s a $47,000 decrease on a $200,000 home. Well, decrease from $270,000 something to $220,000. It’s like $47,000 decrease on that home. So, I’m like, “Oh, man, maybe I should hit my realtor,” because I was looking for homes before. I’ve taken over a year to look for a home and she’s like, “Maybe you’re just not ready for a home right now, Charles.” She’s like, “Look, a lot of these homes are high price. You’re worried about it being half your check or 40% of your check if you do buy one at these rates. So, maybe you should just wait.” I was like, “You know what? That’s probably right.” She’s been a realtor for a decade or so. So, she’s not worried about it. She’s still selling homes in California. Apparently, it’s two-income families.

Todd Sachs:

Well, you just said that she’s only been an agent for 10 years. She doesn’t even know what reality is.

Caller:

Well, I’m just guessing. I’m not even sure if it’s been like 10 years though.

Todd Sachs:

The problem is there are a lot of people-

Caller:

I just know she’s still selling homes.

Todd Sachs:

Yeah, there’s a lot of people that they don’t even know what reality is. They’ve never experienced a downturn. I mean, that’s the thing. Really since 2012, 2013, the market’s been going up, up, up, up, up. It’s been great. They didn’t travel down with it and understand what it was like when people were going through hard times. We haven’t really had any hard times.

Caller:

No, we’re starting to get into them right now, but I’m just hoping Jerome Powell is keeping the interest rates high that way. I think he’s just trying to keep him high so he can see how much damage he can do before he has to decrease, I think is what he’s doing, if I was to look at it from not a non-professional point of view, just because he’s just like, “Nope, not decreasing. Nope, we’re going to keep them high for 2024, maybe 2025, maybe the end of 2024. We’ll see.” A lot of people are like, “Spring’s probably a good time for things to crash,” because I’m a trucker. So, there’s trucking companies in California going out of business. There’s been like five of them.

Convoy went out of business. A lot of the local mom-and-pop shop ones have gone out of business just because it’s hard for them to keep their funding for their trucks since the rates have dropped so much. I’d watched a video talking about every time there’s been a downturn, it always starts with trucking, because that’s where everything slows down is people buying stuff.

Todd Sachs:

What do you haul?

Caller:

So I work for JB Hunt. I do Entumoto. So, I take stuff to and from the rail. So, right now, for this time of year, it’s like holiday season. So, stores are trying and get everything out. We do loads for Walmart, for Target. Target just opened a one-mile-long building in Paris, California as a fulfillment center for online stuff, because they’re trying to compete with Amazon a bit more for online. So, now we’re doing loads to there, which makes traffic terrible, because it’s two-lane highway in, two-lane highway out. There’s a lot more trucks, more people live there.

Todd Sachs:

What do you think about having an electric truck?

Caller:

Nope. Nope. I would never own an electric truck. I don’t even want an electric car. That’s why I just bought myself a V8. Well, it’s a 2008 V8, so it’s not like I spent that much on it.

Todd Sachs:

I can’t even imagine the power that’s required to… How many pounds do you haul in a big truck?

Caller:

So the requirement is you can’t haul anything heavier than 80,000 pounds all together for the truck weight, the trailer weight, and everything in it. So, probably you can’t really go over like 47,000 in trailer weight and already the EV batteries… I was talking to a Walmart driver that was driving a hydrogen truck and I’m like, “I hope that doesn’t blow up on you,” one. Then he said that for the hydrogen truck, I think it’s the hydrogen truck, it’s also for the EVs that there’s an extra 5,000 pounds. Already the big companies have gotten waivers to haul up to 85,000 pounds altogether with the battery. These batteries don’t last all day. So, we have two electric trucks in Southgate LA.

I don’t work out of LA, but I do load to and from LA. They only have four of them. They keep two on the charger and then whoever’s using electric trucks that day will probably have to swap out midday and then grab the other two trucks, put those trucks back on the charger, and then go either finish their routes or whatever. So, I’m assuming they only last for six to eight hours. I myself work like 13-hour a day. So, that’s never going to work for me being a trucker.

Todd Sachs:

Are you seeing a slowdown?

Caller:

Yeah, I’ve seen more and more places have less trailers, at least less of ours, which means less trailers altogether. So, Walmart, Target, Wayfair, XPO, stuff like that. We’re delivering a little bit less to those places, but JB Hunt’s been picking up more contracts for customers. So, in Southern California, we’re doing more loads for Costco now. So, it’s a hit and miss. It just depends. There is a slowdown. But for me, myself, with my work ethic, it’s not really slow for me, but it is slow for a lot of other people out there. There’s a lot more layoffs for trucks.

Todd Sachs:

So you said you’re working how many hours? How many hours a day?

Caller:

I work about 13 hours.

Todd Sachs:

Thirteen-hour days, you would do that, what, five days a week?

Caller:

Six days.

Todd Sachs:

Six days a week. I mean you’re busting your backside.

Caller:

I’m a workaholic. My buddy’s son called me the energizer bunny one day. He’s like, “Man, this guy just keeps going. He just never stops.” I’m like, “Yeah, that’s how I’m wired. I just get it and go, go, go.”

Todd Sachs:

So when you’re looking at houses right now, are you looking to buy by yourself?

Caller:

So I’m trying to buy for myself. I’m a first time buyer, so I’m trying to buy for myself. Then also, I am a veteran, so I’m trying to use my VA loan. But the problem is with the interest rates, with the housing prices over here, for a $300,000 home, that’s almost half my paycheck and I’m just not going to do it. That’s almost half of it just for the mortgage. That doesn’t include utilities, gas, food, me having to fix things, me buying things for the house, stuff like that.

Todd Sachs:

Well, let me say thank you for your service. We appreciate you.

Melissa LeVie:

Yup, absolutely.

Caller:

So before taxes, I make average-

I make around $1,700 before taxes in California.

Then lately because of the holiday season, I’ve been making a little over $2,000. So, after taxes, it’s about $1,500, $1,600. But even then, that’s not enough for me. That’s only during holiday season. That’s not year round. So, that’s not even enough for me to keep up. So, I’m just going to keep paying stuff off and then just keep stacking money to the side, because that’s what I’ve been trying to do is just stack money to the side.

Todd Sachs:

Do you have credit card debt?

Caller:

I have some. It’s not a lot. It’s only maybe $1,000.

Todd Sachs:

Okay. But you pay that off every month or are you carrying that over?

Caller:

I keep hearing mixed things. I just try to pay it off because I’ve been using a credit repair company to help me fix my credit. They’ll send letters to the major bureaus and they’ve gotten my credit score increased. So, it’s like Equifax is almost 700 now. So, I’ve just been stacking money and paying my stuff off and I just bought this V8. So, the payment and the insurance altogether is like $400. It’s not like I spent a lot of money on it.

Todd Sachs:

Well, you hang in there, man. Is there anything that you want to ask a question?

Caller:

Not really a question, but speaking of turning warehouses into rentals in LA, where you can rent a 200-square foot little thing and it’s $1,000 a month or $900 a month and all it is a bed for you to sleep in LA.

Todd Sachs:

Yeah, LA’s got big problems.

Caller:

Oh, yeah. I mean especially after the fire on I-10, those dummies. Yeah, that’s why. I just came back from Tennessee for a buddy’s wedding, so I’m just thinking about moving out of California, anyway. So, that’s another reason I’ve been holding off on buying, because I’m like, “Why would I buy in California with everything high in California?” I just came from Tennessee and gas over there is $2.70, $2.80.

Todd Sachs:

How much is gas where you are, seven bucks?

Caller:

So inland, it’s $5 around. $5 is the highest. On the coast, it’s like seven.

Melissa LeVie:

It’s crazy.

Caller:

Maybe eight at the more richer places. So, I was just waiting for…

Todd Sachs:

Yeah.

Caller 1:

And so I was just waiting for gasoline barrels to skyrocket because I forgot who I was listening to, they said it might reach, if this war keeps going on in the Middle East, it could reach up to like a $100, $150 a barrel. And I’m like, well that sucks for California because 60% of our fuel is imported from Saudi Arabia and other places. And I don’t understand why, but it is.

Todd Sachs:

All right, buddy. Well look man, we appreciate you.

Melissa LeVie:

Thank you, Charles.

Todd Sachs:

We appreciate chatting with you, man. But thanks for calling in. God bless you. Good luck.

Caller 1:

All right, thanks.

Melissa LeVie:

Thank you.

Todd Sachs:

Okay buddy. You got to love it. Here’s a guy, he’s working six days a week, 13 hours a day.

Melissa LeVie:

13 hours a day.

Todd Sachs:

I mean, he’s struggling to live. And guys, this is what’s happening. Let’s talk about delinquencies because I want to talk about the facts of what we’re about to see. So if you could pull up that article, mortgagebankersassociation.org. This is the association that serves the banking, the mortgage and banking industry. The important thing that we want to look at here guys, is I want to look at delinquency rates by loan type is what I really want to do, is the total delinquency rate for conventional loans, this is from the second quarter to the third quarter of this year. For conventional loans, went up 21 basis points to 2.5%. FHA delinquency, and this is what I want to focus on because this is today’s subprime. What we experienced back in 2008, FHA essentially replaced subprime lending. They in a lot of cases reduced the qualifications that a borrower needed to buy. They allowed lesser credit scores, higher debt to income ratios and really created these programs where people didn’t really put a lot of money down to get the loan.

FHA delinquency rate between second quarter and third quarter increased 55 basis points to 9.5%. And VA delinquency rate increased by 6 basis points to 3.76%. So FHA, the highest delinquency. And by the way, this is what the government is bailing out. This FHA borrower is what seems to be getting the bulk of the bailouts right now, or had been getting the bailouts and now will still get bailouts probably because they’re doing things like, oh, you were going to take your 30-year mortgage and we’re going to cast it to a 40-year mortgage, guys. VA’s already had that, but they started doing this with FHA. So two things, and if you’ve listened to my videos before, you’ve heard me say it, but I’m just going to reiterate it, they will take up to 30%.

You got somebody that bought a house, they knew what the payment was that they thought they could afford. They get approved, they get the keys, they move in. In a lot of cases they’ve been bailed out with the moratorium and now they’re saying to them, okay, look, we want to keep you in the house, which is good, I guess, as long as you can afford to fix things, but we’re going to take 30% of your loan balance. It’s a lot. 30% of your loan balance, and we’re going to put it on a second loan on the back end of your mortgage and that’s going to be interest free and you don’t have to pay that off until the end if you ever finish paying off your house in 40 years now. And we’re going to recast a balance not to a 30-year, but to a 30-year, and it’s going to drop your payments down. Now, this is great.

Everybody I guess wishes that this could happen. The problem is you’re never going to pay off your house. You got a 40-year mortgage, you’re going to pay an astronomical amount for your house. It’s supposed to be an investment. People buy a house because they’re hoping that it becomes an investment for them, but now it’s a burden. It’s a depreciating asset. People say, ah, the house is not a depreciating asset. It is. Don’t fix it and see what happens to it. It depreciates fast. By the time you buy your house, first five years you’re paying nothing but interest. Now you’re going to recast it to 40 years. That’s going to reset that. All you’re doing is making the banks rich at this point. And now you’re stuck in your house.

Melissa LeVie:

You’re stuck, right. They’re stuck.

Todd Sachs:

Stuck.

Melissa LeVie:

Yeah. Yeah. And that’s why we’re probably going to get to a point where people are walking away.

Todd Sachs:

Let’s go to the HUD. Joe, we’re just so people can see it here. Hud.gov COVID-19 forbearance on FHA insured, single-Family Mortgages, the COVID-19 forbearance option for FHA, single-family insured mortgages and HECM. That’s a reverse mortgage for older people, elderly people. Extensions will end on November 30th, 2023. So what I was saying is that the last day that borrowers can apply for either forbearance option is May 31st 2023. So that’s over, right? Six months is what you could get. FHA standard forbearance options will still be available for borrowers who encounter difficulties in making their mortgage payments. Homeowners should contact their mortgage servicer for payment assistant programs options after May 31st 2023. So that’s what I’m talking about, where they’re taking and recasting the balances into forty-year mortgages. Ridiculous.

Melissa LeVie:

Now, we did have a comment here. Todd – they initiated a new forbearance policy. Six more months. Google FHFA announces enhanced payment deferral policies for borrowers facing financial hardship for a quick read. So maybe there’s more extension.

Todd Sachs:

Yeah, well, they did say there’s extension options. There’s more options for these borrowers in FHA. The White House does not want foreclosures. Pull it up.

Melissa LeVie:

Yeah, let me go.

Todd Sachs:

Let’s see what it says. FHFA enhanced payment deferral policies. Let’s see. I do know that if you have a conventional mortgage and you’re having trouble paying your mortgage, there are basically five things that you can do. One, there’s nothing. You get reinstated. You get your six months for no payments for six months, and then you have to repay all the payments that you missed right away. That’s option one for conventional. That’s going to be coming December one. Repayment plan, you’ll establish a repayment plan and pay a portion of your missed payments off each month until the entire missed amount is accounted for. The third option is a deferral, which means that you’ll defer the missed payments until the maturity date of your loans. So they take the whole six months that you haven’t paid, they throw it on the back and they’ll make that non-interest bearing.

The fourth thing here is a flex modification program. Your servicer will permanently extend your loan’s term and or lower your interest rate to lower your monthly payments. So now they’re saying, look, we don’t want this house back. We’ll even lower your interest rate or you can refinance. The problem with refinancing is you have to have a job, and a lot of people that aren’t paying their mortgages, they don’t have a job, they’ve been laid off let go, or they’re making less. You have to re-qualify all over again. So if you ended up losing your job and you took a job that’s for less money, you have to re-qualify for it. Did you find it?

Melissa LeVie:

So everything I’m seeing here goes dates back to March and April.

Todd Sachs:

Yeah

Melissa LeVie:

So yeah, I don’t see anything that’s coming up that’s a recent announcement.

Todd Sachs:

Yeah. The only recent announcements that I’ve seen is it’s ending, but there are other options for you like recasting, if you’re FHA. Well, there are options for conventional too, but they’re just not as good as if you have an FHA loan. So the government is stepping in and continuing its bailout, which if you have an FHA loan you’re happy about.

Melissa LeVie:

Oh, okay. Okay. Just real quick, we have some super cash. I think the economy will crash no matter what the White House does. And we also had another-

Melissa LeVie:

Yeah.

Todd Sachs:

All right. Thanks Charles.

Melissa LeVie:

Thank you Charles. And I seen a listing with an Assumable FHA mortgage at 3%.

Todd Sachs:

Well let’s talk about this because everybody thinks that assumable mortgages are the magic bullet here. They’re like, oh yeah, well, you can assume a loan. All right, let me tell you about what you have to do when you assume somebody’s loan, if they’re selling it for $500,000 and their mortgage balance is 300,000, you have to put the rest down in cash or you have to get a second mortgage, which is going to be very expensive. So yes, you can… Assumable mortgages sound like a great idea and they sound like a good option in the world of the people that have refinanced and have these low interest rates. But unless you have a lot of cash, it’s very hard to take advantage of that to where it makes sense. Slick Rick. Thanks man. We appreciate it. Nope. St Charles. I was the one on the call man. That’s awesome. Dude, if I’d have known that, I would’ve asked you what do you do to get those freaking arms, man? Sheesh. I used to have arms like that.

Melissa LeVie:

Oh gosh.

Todd Sachs:

I know I look close to that now, but…

Melissa LeVie:

Yes, we do have a viewer that would like to come on. Joe, do you want to bring him in?

Todd Sachs:

We got another caller?

Melissa LeVie:

Yeah, we have another caller. You’ll need to unmute yourself.

Todd Sachs:

Then we’re going to talk about contract cancellations because they’ve been like crazy. And I want to tell you about a lawyer that I had on last Saturday. You guys should check out his, if you haven’t seen last Saturday’s podcast, it was a real estate attorney. Lots, lots and lots of value. David Thurston, he’s a friend of mine, but he’s also, yeah, he’s one of our preferred referral companies that we have on our website. And I’ll just quick shout out to, if you guys need an agent, if you don’t have an agent and you’re looking for a good buyer agent or listing agent, we have a lot of agents throughout the country. Chances are we do have somebody in your city. If you go to our website, sacksreality.com, you click on the map of the United States. This is a new program for us that we are implementing. We are doing the best that we can to get it up and running and get profiles on things like that.

Just click on Florida or something, Joe, show these people while they’re looking at it. We’ve got agents that you can click on one of their bios. You can watch a video of them, very social media style. You can book a call with them. If you do happen to click on our website and you don’t have somebody in your city or your state, send an email to me directly. Just be patient because sometimes it may take us a week or so to get back to you because we do get a lot of inquiries of people that need good agents. We take this very seriously. These are agents that have very high reviews that they are full time, and we do vet them out. Look, I can’t promise you the best experience all the time. You have to do your own due diligence, but I can tell you that these are people that have really passed our initial criteria that we feel are great agents in the industry and we’re happy to help you. We want to help you. We want you to have a good experience.

Melissa LeVie:

Okay. All right, we’re ready. CFA finance guy.

Todd Sachs:

All right.

Caller 2:

Hey guys. Thanks for bringing me on.

Todd Sachs:

What’s happening? How are you?

Caller 2:

I’m good. I had a question. I’m considering buying a house. It’s a four unit house. It’s 1.4 million. I was just wondering, do you think it’s a good time to buy right now or should I just continue to save my money and maybe buy after the recession or next year?

Todd Sachs:

Where do you live?

Caller 2:

I live in Queens, New York.

Todd Sachs:

In Queens, New York, or you’re looking to buy in Queens?

Caller 2:

Yeah, I’m not going to live there. I’m just going to rent it out. Collect the rent, pay the mortgage, basically.

Todd Sachs:

How much can you rent it for?

Caller 2:

So there’s four units each unit I should be able to get at least 2000.

Todd Sachs:

Okay, so you got 8,000 in income.

Caller 2:

Yeah.

Todd Sachs:

Yeah. And you want to pay how much for it?

Caller 2:

They’re asking 1.4 million,

Todd Sachs:

Too much money. It’s not a good deal.

Caller 2:

Do you think I should put in an offer maybe at a lower price or just pass or see if they reduced?

Todd Sachs:

You should be somewhere around 800, $850,000. Did we lose him?

Caller 2:

I’m sorry.

Todd Sachs:

So here, here’s the thing when you’re looking at rentals and a lot of people, they make this mistake all the time. It doesn’t make sense. First of all, I have been investing in real estate for over 25 years. I have been getting rid of all my residential rentals because of multiple reasons. Number one, they’re weaponizing tenants against landlords in many places. You’ve got rent controls. And I get it. Look, a lot of people have been burned by them, but they’re hurting mom and pop businesses and we do need rentals. But the problem that we have here is that there’s no money to fix things up when people move out and you get a bad tenant or if they don’t pay you for a couple of months and it takes you seven months to get them out of the place.

So if you can’t get 1% monthly rents based on the money that you purchased it. For example, if I buy a $500,000 multi-unit building, I want $5,000 a month, right? In residential, you’re not back billing for common area maintenance. You’re not back billing for your insurance payment. You’re not back billing for your taxes. So you’ve got taxes, insurance, you’ve got upkeep. New York, they are completely changing. I think they’re one of the first states that are going to require landlords to retrofit and get rid of fossil fuels gas and oil burners in their apartments. This is going to be a big burden for landlords. You’re going to see a lot of these things get dumped and I don’t think it’s a good deal.

Caller 2:

Yeah, thank you. I was kind of leaning towards that too. I have heard of them getting rid of, they’re trying to make everybody go electric here, so they are putting laws in place for that too. Yeah. So, yeah, I think I’ll probably just end up continue saving my money. I have a pretty good job. I work in finance. Yeah.

Todd Sachs:

Here’s what I think. If anybody’s listening and they are interested in investing in real estate, I think your best bet is going to be specific commercial properties. So stay away from office buildings, but if you can get anything that has warehouse, outside storage, contractor yards are always great. Contractors not able to park their marked vehicles. If you get a legitimate contractor, they’re going to have markings on their vehicles. A lot of communities don’t allow for that, especially if they’re in an HOA. They always need a place to put their equipment. So outside storage yards.

Land, land for farming, land for having chickens or cows or whatever, I think that’s a safe investment. As safe as it gets. Residential, I believe that residential landlording ship has sailed. When you start seeing all of the Instagram people in front of the Lamborghini’s bragging about they’re making $250,000 a month in profit and they use the BRRRR method and this and that and refinance and pull all the equity out of the house and go buy another one, they are about to have a rude awakening. Not to mention the fact that during the pandemic, the government prevented landlords from collecting rent.

They gave stimulus money, they gave 700 and some dollars unemployment, federal stipend to unemployment. They airdropped stimulus money to every household and they did not require in that stimulus money to pay their rent. They basically weaponized the tenants against the landlords and said, you can’t kick these people out. In Baltimore, as of October one, tenants are entitled to lawyer representation. If they can’t afford it, they can have a lawyer appointed to them to prevent themselves from being evicted and for not paying the rent. Doesn’t make sense. Who in the world wants to be in that business? You’re crazy. I’ve been in that business. It’s the hardest business to be in. And not to mention the fact that everyone dislikes now investors because they know one in four houses are owned by a company. Single family houses, there’ve been a third of the buyers of residential properties year after year after year after year.

They were fed to Wall Street back in 2012 with all the foreclosures bundled up and sold for pennies on the dollar to Wall Street companies. So people are really upset about it. I think the ship has sailed. I think investors should be in these multifamily buildings, but it has to make sense financially and I just don’t think it’s a good business to be in anymore. It’s glamorized.

Melissa LeVie:

Okay, cool.

Todd Sachs:

All right, let’s take another caller. Beverly, how are you Beverly?

Caller 3:

Hi, I’m doing well. How are you all?

Todd Sachs:

I’m doing good.

Melissa LeVie:

Great.

Todd Sachs:

Where are you calling from?

Caller 3:

Columbus, Ohio.

Todd Sachs:

All right. How are you?

Caller 3:

Ready?

Todd Sachs:

We’re ready.

Melissa LeVie:

Yeah. Do you have question?

Todd Sachs:

Let’s have it.

Caller 3:

Yeah, I have a question and a comment kind of. So we are anticipating Intel coming to Columbus Ohio. It’s actually New Albany, Ohio, which is about 15 minutes from Columbus. And they say it’s bringing… They’re building it now. So 10,000 jobs, seven thousand which are construction jobs. And then they’re saying the average salary is like 130K. They said it’s going to be the biggest chip manufacturer in the world and they’re expecting to build 30 more hotels around New Albany, three-hundred-thousand homes in the next 30 years. I say all that to say what is going on? I feel like this crash people are talking about, I’m seeing that in places on the map, but I just kind of feel like, oh, there’s no hope for us. With Intel coming here, no way. And I’m also a real estate agent actually. And so people are asking me and my opinion and I’m just telling them like, yeah, I don’t see it going down at all here.

Todd Sachs:

Well, you are in one of the areas where you have some of the most affordable housing in the country.

Caller 3:

Yeah.

Todd Sachs:

So that kind of puts you in a unique position. And also you’re in a location to where it is very attractive for businesses because they can reach the bulk of the country by tractor trailer truck. So you’re in a sort of a real sweet spot. And what I’ll say about where you live is, geez, I tell you, I was there not too long ago. It’s like taking a step back in time. I think people still have flip phones, the old flip phones. I think I saw more phone booths where people don’t even know what they are. So you kind of have a sweet spot there. It’s an anomaly. And I think that you probably are going to be poised for a lot of growth.

The problem is when? So we’re still dealing with, you can take all of the hope in the world, but you still have the affordability issue where based on current salaries that the numbers still have to work. So I think that will you see explosive growth in the next year or so? Probably not. Until they start to put these jobs in place and start building out the area, you’re probably several years off Now, it all depends. You could say, well that’s great if I buy a house here and I happen to be in the area that it will appreciate the most, I’ll be in great shape in 10 years. The question is, do most people live that long in one place? And for young people, they’re not prepared to buy a house and own it for seven to 10 years. And this is what we’re seeing a lot with the remorse.

A lot of the younger generation, the millennials bought these houses because they wanted it today. And I’m not knocking on them, but what happened is now they’re realizing, I don’t want to be here anymore. I want to move. So it’s preventing them now from taking jobs in other states, from exploring in other areas. So I guess what I’m saying is we want to make sure that it’s not the golden handcuffs again, that you’re buying something, you’re holding onto it in hopes that it’s going to be something in 10 years and you don’t even want to be there for that period of time. Now, it’s probably a great place to invest. I just said that investing in residential rentals isn’t the greatest thing, but probably where you are, and you probably still have a lot of investors that are buying up rentals.

Caller 2:

Yes, we do have a lot of investors here. And I was in real estate in 2017 here. Even, yeah, 2018 there were houses for 124. We were so affordable. And that same house, I got to see some of the same houses come in the market 269 they were going for in 2021. So some people are feeling the inflation pain, the unaffordability here. It’s really kind of sad. I saw someone in the comments said, some of the elderly people or older people are living in their car. And I’m like, oh, that’s just so sad because I see that too here. Even with our lower prices relative to everyone else.

Todd Sachs:

The problem is the people that are domestically migrating there from other states don’t think it’s a overpriced market. So the ones, of course, when you’re living in an area… I just had a podcast that I shot with a real estate broker in Florida, and we were talking about this, it’s like the Floridians are off because all the people moved from California and New York and Philadelphia and they moved to Florida and the Floridians are upset because now their houses have accelerated. All the prices have gone up to the point to where they can’t live. But the people from California are like, man, this is a bargain. I sold my house for $3 million. It was shy of a shack, and now I’m going to buy a Taj Mahal for 800,000 and I’m going to pay cash. And the people in Florida are saying, yeah, but it was really a $400,000 house, but they didn’t see it that way.

So what’s going to happen is these jobs that are created, they’re probably going to hire talent from all over the country and they’re going to bring people in from some of these higher priced areas. And it’s going to skyrocket when they eventually get around to hiring those jobs. The question is, and this is the thing, you have to be mindful because I’ve watched the development happen. I owned eight apartments right near, it was downtown in Baltimore near the old GM plant. The GM plant went bust. We all know that. It was a big piece of property, sat vacant for years. Tons of crime moved into the area, project’s right up the street. And when Amazon bought it, everybody was like, holy cow, they’re going to build an Amazon super center here. And everybody thought it was going to be the best thing in the world and the values were just going to go up. And that didn’t happen.

That didn’t happen because they didn’t pay people the money that they need for it to happen. So a lot of these companies, they’re keeping people poor. So they bring in all these jobs, they tell you it’s going to be a hundred thousand dollars a year, but it’s not. So you can’t believe it. So everything’s a wish. They put these great plans together to get tax credits and hey, we’re going to do all this and we’re going to hire all these people and we’re going to make the area great and blah, blah, blah. The bottom line is it ends up that big business, they just want to get rich and they don’t want to pay people because they want all the money. And so that’s the issue that we have. So would I bank on it? I don’t know that I would bank on it. I would probably wait and see it first. I’d have to see some earth being moved around before I would be convinced to do it.

Caller 2:

Okay. Thank you. I got to go. Thank you so much.

Melissa LeVie:

Thank you. Thank you.

Caller 2:

All right. Thanks. Appreciate you. All right.

Caller 4:

Hello? Hi.

Todd Sachs:

What’s going buddy?

Caller 4:

I go by the handle. Stay Curious in the chat. That’s who I am.

Todd Sachs:

Okay, cool.

Melissa LeVie:

Stay Curious. Okay, cool. Hello.

Caller 4:

Hi. I had something that’s been bothering me for a while and I’m trying to figure out what it means. Was it Mike Maloney and Peter Schiff have been talking about the banks holding these 30 year mortgages and also the bonds causing these unrealized losses with the banks. And I’m just trying to figure out, does that mean the banks are actually losing money every month that they hold these mortgages? Or is it something that’s just potentially going to become losses in the future? And how would that happen? How would they actually realize these losses?

Todd Sachs:

Yeah. Well the problem is is that with a lot of the banks, they don’t have deposits. So deposits are down. And what they do with the deposits is they lend money. So when they don’t have a lot of deposits in the bank, they can’t make these other loans to make up for the fact that the money that they borrowed is they’re losing money on the money that they’re borrowing to operate and to keep their branches open. And so what we had was a lot of cash that was injected into the banking system. And then with everybody going out and spending their money on credit cards and things like that, their bank account balances are down.

So when a bank is out borrowing money at five and a half percent and they have a 3% mortgage that they’re collecting, they’re losing money. So, these guys are, they know a lot more about this than I do. I’m a real estate guy, I’m not a finance guy, but I just spent the last week, last week with them trying to understand the banking crisis. And it does make sense and that’s why they’re bailing banks out. That’s why they’re prepared to even bail any bank out that will become financially insolvent. So I think ultimately what’s going to happen is they’re going to have to print more money. And what that’s going to do is give us more inflation. And that’s why…

Todd Sachs:

Do is give us more inflation and that’s why these guys believe in gold, right? So Peter Schiff, Mike Maloney, they’re selling gold so, of course, they’re going to say that the dollar’s going to collapse and the gold is going to be what you need to be investing in because that’s your hedge against the dollar collapsing.

Then, I interviewed a guy named Brent Johnson…

Speaker 2:

Brent Johnson.

Melissa LeVie:

Johnson.

Speaker 2:

Anyway, Brent Johnson. He’s a good one to look up, but Brent believes that the dollar’s going to continue to be strong because we’re the world’s currency, reserve currency, so it’s interesting.

I don’t really know what’s going to happen in the banking industry other than they are losing money. There is the battle between these finance guys that are saying, “The dollar’s going to collapse; the dollar’s not going to collapse.” All I know is that we have an affordability crisis that’s on our hands and a debt crisis.

So, if the borrowers are defaulting, that is going to add to the banking crisis. So if we got $1.3 trillion worth of credit card debt and you figure, let’s just say, 30% of that defaults, that’s a lot of money that these companies are… They don’t have it coming in to satisfy their debt. They have to go out and buy, or borrow from the Fed, more money to operate and run their bank and keep themselves solvent because the money that they’re getting on these mortgages isn’t enough to outweigh the losses that they’re making. I wish I could give you a better answer on it, but it does appear that it is a banking crisis.

Speaker 3:

Well, thank you for taking my question.

Todd Sachs:

No problem. Sounds good, buddy.

Melissa LeVie:

Bye-bye. Thank you.

Todd Sachs:

Thanks for your call. I think we got… What have we got? Phil-

Melissa LeVie:

Oh we have Phil.

Todd Sachs:

… somewhere there. We got broker Phil. He’s on deck.

Phil :

Hey, what’s happening guys?

Todd Sachs:

What’s happening? How are you, buddy?

Phil :

Doing good. I’m actually driving back to Jacksonville from Orlando. We’re trying to put together a development deal on 20 acres, and I think we’re close, but I wanted to call in. Welcome back to the mainland, first of all.

Todd Sachs:

Thanks, buddy.

Phil :

How was everything? Good?

Todd Sachs:

It was great. The weather was crappy, but the food was good. It’s interesting, man, I can’t believe. A lot of the Puerto Rican people, I don’t think, really care for the people in the mainland, the state side.

Phil :

There’s a culture clash.

Todd Sachs:

Yeah. There were some pretty nasty signs driving down that the paint can artists were making on sides of buildings and stuff about against the colonization of… I think the word… Well, I’m not even going to say it, anyway. Phil, crazy, but it was fun. We had a good time.

What I got out of it is that a lot of people go to Puerto Rico to avoid paying taxes. It’s a 4% tax to Americans and, from what I understand, the Puerto Ricans actually pay a 12% tax. So that may be one of the reasons why they don’t like American people moving to Puerto Rico.

Phil :

I’d rather pay the taxes for the conveniences of the mainland, but what I was going to say was I wanted to call in. The gentleman that you were talking to about the investment in New York about buying the building, one of the things I’m looking at is looking at multi-unit residential. I’m looking between 5 and 15 units because it’s a sweet spot. You have the big investors and the hedge funds. They’re buying 20 units and up, and then you have the mom and pop investors buying 1, 2, 3, 4 units. So there’s an open window between 5 and 15, up to 20, with multi-residential. And then you have all the depreciation elements when it comes to taxes and everything else.

So one of the things that I’m talking to people about when they want to buy investment properties is going stepping up. It’s bigger numbers and that scares people sometimes, but it’s bigger numbers. The percentages are better. Yeah, you’re borrowing more, you’re putting a little more out, but your percentages on your returns are better and you have the tax breaks of all the depreciation. So that’s one of the things that I’m talking to people about because, like you were saying, you get a bad tenant, they don’t pay you.

Down here in Florida, it takes 30-45 days, they’re out. But up north, you’re talking New York, it might take you over a year to get some people out, so that hinders you when it’s going single family, even one or two units. But when you look at the larger 5 to 15, you’re in that sweet spot. You have less competition because the bigger investors are going larger units, so it opens up a window for people. You have a management company. You’re not going to rent; manage it yourself mostly, most people, but it gives you a little more flexibility and it gives you a little more cashflow and bigger percentages of returns after you have all the write-offs.

So I thought I’d just throw that out there. Maybe that could help somebody that’s looking to spend that kind of money. I wouldn’t do it in New York, of course, but you could put that kind of money into in a smaller town in a less populated area and have solid rents and be in a pretty good position instead of being in one building with one renter. It gives you a lot of risk. [inaudible 01:39:14] years.

Todd Sachs:

No, no, it’s definitely food for thought for people that want to get into that residential rental industry, which I still don’t think it’s a great business to be in, but I’m just one person. But I did have a fair share of these through the years. A lot of it has to do with the building construction too because if you stack a building and it’s wood construction, you can hear everything a neighbor’s doing. That can create a whole host of problems too.

In Baltimore, we do have a lot of 12 unit, 20 unit, 18 unit buildings. That’s about as big as we get. When I get an investor, they call me up and say they want to buy a 100 unit apartment building or a complex in Maryland, they just don’t exist. But yeah, definitely. Well, I appreciate it, buddy. So what else you got going on? Anything?

Phil :

Just working like crazy, man. I got the Tennessee deals done. We got a bunch of stuff happening. I got listings. I got a lot happening, but the traffic is down. I have a lot. I mean, prices are coming down. We have some reductions we’re going to be doing this week, and it’s throughout Florida. I have one in the villages, one in Jacksonville, one in Punta, Florida. I’m pulling one in Fort Lauderdale shortly, and working on a few others. But it’s the trend of everything clogging up and slowing down.

The inventory between the three MLSs, I have the three. I have one in Jacksonville for North Florida. I have the Orlando Regional, which is the center of the state from Daytona to Tampa, and down to Cape Coral and I have beaches, which is St. Lucie County, all the way down to the Keys. What’s happening is the inventory, in the last seven days we have 10, 15,000 properties going on the market. You have 7, 8,000 price reductions. You have two 3,000 deals falling apart, going back on cancellations. Their contracts are falling apart for some reason or another, and all that’s real time.

So the public doesn’t see that until next month. However, we’re seeing it in real time and the market, a lot of things are hitting and nothing is really selling, and the price reductions are happening in a large percentage. So I think next month, when you see the numbers for November, I think it’s going to be a big wake-up call nationwide.

Todd Sachs:

You’ve got some of the worst stats, man. Florida’s got some of the worst stats in the industry right now. You knew that.

Phil :

I do.

Todd Sachs:

Besides sinkhole, and you and I have talked about that, you got a lot more than sinkholes, right?

Phil :

Yeah. There’s a lot going on.

Todd Sachs:

You got Jacksonville, Florida, last month, 24% contract cancellations or that out of the top 10, you’ve got 1, 2, 3, 4, 5. Out of the top 10 worst contract cancellations, you have 5 of them, 24% – Jacksonville, 23.6 – Orlando, 22.7 – Tampa, 22% – Fort Lauderdale, Miami – 20% cancellations. You got people walking away from contracts like mad.

Phil :

And a lot of them are walking away from deposits too. They’re letting that go. They’re losing their deposits [inaudible 01:42:40].

Todd Sachs:

Look, guys, you better wake up out there. If you’re trying to buy something, don’t let your agent sucker you into putting a big deposit down because you just heard what Phil said, you’re going to lose it.

 What you have to do, I had a really interesting last Saturday, if you guys care to watch it. It’s a long one. I don’t know. It is probably an hour podcast, not quite as long as this podcast, or Tuesday night podcast. We usually go around two hours. But anyway, this podcast is with David Thurston. He’s a real estate attorney. Phil, I was saying to him, I said, “Look, why is it…” Because we’re seeing it Maryland too where the agents are just calling up saying, “Hey, I’m sending you over release. My buyers are walking away.” And you’re like, “What? Your buyers are what? You’re in a contract. We’ve gone through the contingencies. You’ve had your home inspection. You’ve gone through the appraisal process. What do you mean they’re canceling?” “We’re canceling. The buyer’s backing out.”

So what I said to him is, “Does the contract mean absolutely anything anymore? Does it mean anything?” Because it’s like, no, it doesn’t. I’m not an attorney. There it is, right there, guys. You go should watch it. It’s amazing. It’s amazing-

Phil :

I saw that. Really good intel. Really good intel.

Todd Sachs:

Yeah, great information, especially if you’re going to be a buyer. We talk about all that hangups-

Phil :

Especially why they need title. It’s right there.

Todd Sachs:

You have problems with the title, whether encroachments, things that you should know that your agents don’t tell you about, and most agents don’t tell you about.

But anyway, the bottom line comes down to guys, if you’re buying a house out there, I’m not telling you to walk away from your contract, but it doesn’t seem to me like there’s a whole lot of pursuit going on. They’re more interested in suing the agents and the brokers than they are the buyer or the seller for backing out of their deal. But here’s the thing, some of these buyers are like, “Man, I’m glad I did. I lost $3,000. Thank God, because if I’d have bought it would’ve been a money pit and I’d be miserable for the rest of my 25 years of living there.”

Phil :

Before I go, speaking of lawsuits today, I had a deal closed and the agent… I very rarely deal with buyers, but my deal that was closing in Jacksonville, I was on the sell side, they were buying in Tennessee. So remember I told you I got the license in Tennessee to help them get that done?

So I did that. We finally closed that today. That completed today.

Todd Sachs:

Congratulations.

Phil :

I was a little nervous because the agent for the listing was CENTURY 21. I wanted to see what they were going to do, if they were going to try to change the commission. It was 2.5% coming to me as the buyer agent, and I wanted to make sure on the CD and everything was okay. Because I didn’t know, since they settled that case… Who knew? I didn’t know what they were going to try to do with any current contracts. When I got the CD, everything was on there correct. I was a little concerned if they were going to try to make me come after them, depending on what was going to happen with that, because they changed their policies now where they don’t have to pay the buyer’s agent. So, I didn’t have any issues with that. I just thought I’d tell you that. That was pretty interesting because I was a little curious to see how that was going to go.

Todd Sachs:

Got you. Well, cool buddy.

Phil :

But that worked out.

Todd Sachs:

Well we’re glad you hopped on, man.

Melissa LeVie:

Thanks, Phil.

Todd Sachs:

Good seeing you, buddy.

Phil :

Great idea, guys, of having the call in. It’s really cool. I wanted to say that too.

Todd Sachs:

We do it every now and then.

Melissa LeVie:

It’s fun.

Todd Sachs:

Appreciate it, buddy.

Melissa LeVie:

Thank you.

Speaker 4:

Hey Todd, how’s it going?

Todd Sachs:

Hey, hey. What’s going on, man? How are you?

Speaker 4:

I’m good. I’m out of Connecticut actually. Active duty and everything.

Todd Sachs:

Nice.

Speaker 4:

I’ve been watching your show, Travis’s show over at Real Estate Mindset, Orlando Minor. So really great community to fall into.

Todd Sachs:

Awesome.

Speaker 4:

I first started looking at all of the real estate community and everything when I got into buying. So just to give you a little backstory, basically, we were under contract for our property. That’s along the time that I came into all the channels and everything with all the information that was free out there, trying to be as informed of a buyer as I possibly could. I did the whole VA loan process. The house actually appraised under for about 9,000. Once I caught wind of that, I started looking into the transaction history of the house and found that in… I believe it was 2017, it had sold for 179,000.

Now, as we know, Connecticut in general has higher tax rates and everything. I’m not from here. I’m actually from down South and quickly saw that it was a money pit. The seller wasn’t willing to do anything as far as concessions. They wanted [inaudible 01:47:39] situation which, unknowingly to me, we had already agreed to that. I was able to secure half of my deposit back because it was a more than fair situation for them coming from their purchase price, and everything.

The issue I think with Connecticut that I’m seeing is that people are migrating from New York and coming into Connecticut because, like you said earlier on your channel, it’s a lot cheaper for them to move from New York and commute to Connect… or sorry, move to Connecticut and then commute to New York. So it’s a bunch of different factors. I’m seeing that more as I become more informed of a buyer, but I was like, “Oh, man.” I was like, “I don’t really know what’s going on here.”

But tying into the previous speaker, we are seeing inventory pop up and the right houses that have been renovated quickly turned over, flipped, so to speak. There are good flips from what we’ve seen, but this is just what I’m seeing here. I’m about to actually rotate back to sea and go down to Virginia where I’ll be trying out another housing market and just waiting to see what’s going on there.

Todd Sachs:

Well, what you’re saying is true. So I like to relate it, the housing market, to the stock market. What we see is if you went out today and you bought 1,000 of Apple, or you sold 1,000 shares of Apple, you would not move the price at all. Right? Your sale of 1,000 shares… buy 5,000 shares, is not going to move the Apple stock price from your purchase up or down, whether you buy it or sell it.

But the housing market, because you’re dealing with one homeowner in that particular neighborhood, significantly moves the price, unlike the stocks, based on their ability or desire to overpay, or a seller’s desire to undersell. So what happens is when you get people that are moving from New York City, or a lot of people from California, where the real estate is a lot more expensive in a lot of cases… I’m not talking about Upstate New York where you could still buy a house in the middle of nowhere for $200,000, but when they can buy, sell their house and have a pocket full of cash, and they come to a place like Connecticut and they say, “Hey, I like this house. I’m willing to give them outbid everybody else and overpay $100,000. I’m still to the good. I get what I want. I paid cash. I move the needle.”

So that’s what we’ve watched happen very quickly, and why we kept seeing 20% year-over-year price appreciation, not the actual value of the property. It gives a real false sense of value to the neighborhood, to the sellers, to the homeowners. “Wow, my house is really worth a lot of money because so-and-so just overpaid,” but what I caution everybody is that the same way this happens going up, it can happen very quickly coming down.

So now, we’re in an environment where there aren’t a whole lot of sales. Now we’re in an environment where we’re starting to see more distressed sellers coming on the market. Distressed sellers does not mean distressed houses, doesn’t mean that the house is in bad shape. It means that the seller has to sell. They lost their job or they’re moving for another job, or they’re moving for a family member, or somebody dies and they need to sell it. So for whatever reason, now we’re in an environment where it’s not the best time to sell.

So a seller may decide, “Hey, I’m going to undercut the market because I need to sell, and I don’t care if I drop it a $100,000, I’m going to drop it 20%, or whatever, to get a quick sale.” Well, that’s your new comp in the neighborhood. Now all of a sudden the neighbor says, “Wow, I can’t believe I sold a house. I put it on the market for a price. The neighborhood called me up. They’re like, ‘Why? Why are you putting it on the market for that price?'” I’m like, “Well, you haven’t been inside the house, number one. You didn’t know in this situation,” but the neighbors were concerned. They were like, “Oh, my gosh.” Now it ended up bidding it up and it was a strategy and it sold where it should have.

But my point is that very quickly that one sale could have dropped everybody’s value as far as a comp. Now you only have a couple sales happening in a month or six months, if at all, and that one sale can adjust the price in the community very quickly. So that’s what I caution everybody about the market. It can go up.

One of the reasons why people were walking away from their mortgages back in the ’08 crisis was not because they couldn’t pay their mortgage. That is not everyone that walked away. These are people that walked away because their house was worth 150, 200, $300,000 less than what they paid for it and they were like, “Screw this. My neighbor just bought the same house that I have just about for $150,000 less. I’m not going to keep paying my mortgage.” And they just walk away. So, that’s why we’re in such a critical time in the housing market because anything could happen very quickly. All right, man. Well, we appreciate you calling in and sharing your story.

Speaker 4:

Thank you so much for having me.

Todd Sachs:

Best wishes to you.

Melissa LeVie:

Thank you.

Todd Sachs:

All right. We got another one on deck.

Melissa LeVie:

Tony.

Todd Sachs:

All right, Tony? What’s-

Melissa LeVie:

Hi, Tony.

Todd Sachs:

… happening, Tony?

Tony:

Hey, how you guys doing?

Todd Sachs:

Tony. Tony.

Tony:

Anyway, my question is more to along the lines that my wife and I, we bought an apartment complex in Tulsa, Oklahoma back in 2004. So we already hold it for about 19 years. We were just wondering if it’s a good time to turn around and sell it, and then just grab the money perhaps and put it on T-Bills that are paying about 5% right now, or just keep on holding it for let’s say for another 4 or 5 years. We are planning on retiring in about 2 years.

Todd Sachs:

So this is a house that you’re living in?

Tony:

No, no, no, no. This is an apartment complex that we bought in Tulsa, Oklahoma. We currently live in-

Todd Sachs:

So it’s an apartment complex you bought in Tulsa, Oklahoma?

Tony:

That’s right. We currently live in-

Todd Sachs:

Is it cash flowing right now?

Tony:

Well, the mortgage is paid off. It definitely is cash flow. Rents have-

Todd Sachs:

What is that property worth if you were to sell it? Do you know?

Tony:

We paid 300 for that. I imagine it’s probably around maybe twice as much as that. I would imagine.

Todd Sachs:

So 600,000. And what-

Tony:

Somewhere around-

Todd Sachs:

… are you bringing in in rents?

Tony:

It’s collecting… Let me see. A year, it’s collecting about 55 grand minus-

Todd Sachs:

So 5,000 a month… Right? About a little 40-some hundred a month.

Tony:

Yep.

Todd Sachs:

I’m not an accountant, but I’m just asking-

Tony:

No, no, no.

Todd Sachs:

… this question. Have you been taking the depreciation on it?

Tony:

Yep.

Todd Sachs:

Did you do any kind of advanced cost segregation or you’re just taking the standard depreciation every year?

Tony:

Just taking the straight line depreciation, which is about 27 years and a half.

Todd Sachs:

Right. How long have you owned it?

Tony:

19 years.

Todd Sachs:

So you’re going to get recapture on every penny that you’ve taken back.

Tony:

That’s right.

Todd Sachs:

If you don’t fully depreciate the structure and you sell it before it’s fully depreciated, and I’m not an accountant, but talk to your accountant because it may be a huge tax liability for you to sell. So you might have to continue to hold it for another 8 years or so.

Tony:

Got it. Got it. Got it.

Todd Sachs:

That’s what I would do. If you have tenants in there and they’re paying you and it’s cash flowing and they’re not giving you a hard time, I’d hold onto it.

Tony:

Okay. That’s good.

Todd Sachs:

Definitely.

Tony:

It’s a good second opinion.

Todd Sachs:

All right. Check with your accountant though. Don’t just take my word for it.

Tony:

No, no, no, definitely. No, no. Whatever we’re talking here, I understand is just an opinion.

Todd Sachs:

Yes.

Tony:

That’s correct. All right, guys. Thank you so much.

Todd Sachs:

All right, take care.

Melissa LeVie:

Thank you.

Todd Sachs:

All right. God bless, man.

Tony:

Take care. Bye.

Melissa LeVie:

Bye-bye.

Todd Sachs:

All right. We got Victor on-

Melissa LeVie:

Victor.

Todd Sachs:

… deck here. What’s up, Victor? How are you, man?

Melissa LeVie:

Hello.

Victor:

Hey guys, thank you. Can you hear me?

Todd Sachs:

Yeah, yeah.

Melissa LeVie:

Yes.

Todd Sachs:

We got you.

Victor:

Hey, I’m out of Seattle, Washington. I’m also a real estate agent and I’m an aspiring YouTuber. But hey, what I’ve been noticing in this area I’m in, I don’t see a lot of other agents actually talk about this, but it’s the rental cost per square foot versus the mortgage per square foot, and where I’m at in this area.

So to give you an idea of just this apartment, it’s a two bedroom, one bath, 700 square feet. Well, if I was to turn around and buy this right now, it’d be $3,800 a month at least. Right now though, my rent is only 2,000. So where I’m seeing inside my individual markets (I check and I just looked at the areas), I’m seeing 150%; I’m seeing 190%; I’m seeing 200% more at this current rate.

And also, in the Seattle market, we’re seeing a decrease about 10 to 15% at least every single year. And right now, depending on the area I’m seeing inside of the Greater Seattle Area outside also within 50 miles, we’re looking at 30, 40, 50% decreases year-over-year. So just so you know, it is affecting some of the big markets out on the coastal left over here, so the coastal wall is cracking.

Todd Sachs:

Yeah. In most of the markets in the country right now, it’s cheaper to rent than buy. It’s a problem and that’s exactly what I’m talking about when I say that we have to have a major… either one of two things has to happen. We either need to see a huge wage growth over the next 12 to 18 months, or we need to see prices come down.

I don’t think we’re going to see 3% mortgages again. I think that would be ridiculous. That would be the definition of insanity is doing the same thing and expecting different results. We never in the history of mortgages had the low interest rates that we’ve seen in the last decade, and it was all stimulus based on the last bubble, the last housing crash. The government stepped in and started buying mortgage-backed securities, and that’s the only reason why we saw all those low rates. So now, we’ve allowed the prices to inflate and it’s a crisis.

So here’s the thing. Imagine this: how can we avoid this? We know prices need to come into line for people to be able to afford it, right? We know that if people want to sell their houses, they have to drop the price or they just don’t sell them. Now when the prices have to drop or adjust down, what does that do for the appraised value, the now new market value, of the neighborhood when all of these mortgages… The borrowers will be underwater because their house would be worth less than what they owe on it. What is going to be the answer there?

I know we’re going to have the smart people on the channel and the comments are going to say, “Well, real estate prices only go up.” Well, that’s if the people can stay there and continue to pay their mortgage for the next decade or 15 years, however long it’s going to take. Here, in Maryland, people that bought in 2006, a lot of the buyers in 2006 could not get the price they paid for the house until 2022. That’s a long time it took for them to get back to the price that they paid in 2006. That’s not counting… That’s if everything was kept up. You go 15 years out, 16 years out. What have you done to the house? If you’ve only lived in it, depending on whether it was brand new when you bought it, now things are starting to go up. You got to replace the water heater. You have to replace the heating and air system. Your roof probably is getting close to needing replacement.

So now, they’ve spent money or they need to spend money, and that’s what we’re dealing with now, right? Most of the people that bought in the last couple of years didn’t even get a home inspection. So they’re dealing with things now. If they go to sell those houses, you think the buyers right now are getting home inspections? 100%. Do you think they’re going to be satisfied with your broken stuff in the house or your worn out furnace? No. So now they have to not only deal with the things that aren’t working or that are end of life in order to sell their house. They’re dealing with buyers that can’t afford the payments.

We’ve been saying this for quite some time, and there’s a lot of people that disagree with it. I think more people, like yourself (and I’m not saying that you were in disagreement) but a lot of agents were in denial. Now they’re waking up to the fact that they can’t pay their bills because their buyers aren’t flooding in. Guys, we still have a huge buyer demand. If things come into line, they’re going to get absorbed very quickly: the inventory that’s coming up, the new houses that are being constructed. We’re not even seeing the truth of the inventory of new construction. The shadow inventory, they’re not putting it on the market – the contract cancellations; the people that have put their house on the market took it off in 30 days because nobody bought it. And the Airbnb, we haven’t even talked about the Airbnb market, all these houses now. You’re dealing with areas like Dallas that have forbid Airbnb.

A lot of the municipalities are saying, “If it’s not your primary residence, you can’t have it, a short-term rental.” All these people went out, they bought these houses, a million of them. They have furnished them. They spent money: $30,000 putting furniture in there. Now, they’re coming to the realization that their insurance is doubling and tripling and quadrupling. That’s a huge number. Now it’s costing you 2,500, $3,005,000 for your insurance policy when it was 12, not to mention your property taxes.

So, everybody that is saying that we’re not in a situation here, we’re not in a crisis, that everything is good, has got their head in the sand, or they’re cheerleading the market in hopes that something miraculous is going to happen. The miraculous ship sailed with COVID-19 being canceled. That was your once in a lifetime miraculous ship that came in that blew this market up because of the amount of money that was injected into the economy. Now we are paying the piper. We’ve got the eurodollar that is being traded, but if you think about the US dollar, we’re the world’s reserve currency. What does that say? We’re in debt. We’re going to run out. In not too long of time, the debt load for our federal government, our debt load…

Todd Sachs:

For our federal government, our debt load is going to outpace the amount of taxes that we collect from taxpayers, then what? What happens then? We’re going to raise taxes? We’re going to go back to 90% income tax? Things are a mess. Things are a mess. And what you’re saying is that you’re-

Caller 7:

One thing out here, just so you know, we’re looking at incomes and I go through the Census Bureau and I figure that out, but the average income in this is between 90 and 100,000, 90 and $130,000. And our prices just on average, I’m looking at them right now, are like 1.2, 1.3. We’re 9 or 10 times income at this point in time.

Todd Sachs:

It doesn’t work.

Caller 7:

And I’m also looking at right now on the Seattle, the greater Seattle, the time on market, what the MLS is telling us isn’t exactly true because I’m pulling all these numbers and we’re at like 50, 60, 70 days on market right now. So if you miss your window on your sale, you’re going to be sitting there and sucking wind. Just last week I was at a house that was half a mile from here. It was $2.7 million. No one’s came in there for the last 30 days. They’re taking it off the market and they advertise that right then and there. They’re like, “We’re going to take it off at the market at the end of the week unless you’re going to bring a seller.” Well, I told her, “Quite frankly, you’re actually about 700,000 above the market right now.” So that’s some things that we’re seeing out here.

Todd Sachs:

You didn’t make a friend there, did you?

Caller 7:

What was that?

Todd Sachs:

You didn’t make a friend on that one.

Caller 7:

No, I didn’t make a friend and I just got banned from a Facebook account, a Facebook group. I’m out here talking, I got in a fight with one of my mortgage people this last week because I’m pretty honest about these numbers and I really think that it’s going to be the agents like you guys being honest out there and you got to be direct because these people, they’re signing up for a 30-year mortgage. I want to be here in 30 years.

Todd Sachs:

So thank you. The ship has sailed. I don’t think we’re ever going to see another run like this. If we look at the bubble, I mean just look at the history of home prices on the FRED Chart. I mean all you have to do is look in the history of the prices, we have never seen prices skyrocket ever like they have. We have not had wage growth. Look, I think it was 1983 to 2000, I think it was, I mean home prices at that point in time went up like 300%, wage growth was 17%. I mean look, there you go. Joe’s pulled it up, pull it back up, Joe. I mean, look at this. Look at the chart. It’s crazy. Look at the 2008 downturn. That ain’t nothing like we’re going to see, right?

Look how high we were. I mean we’re going to see, it’s going to… I mean, this is just my opinion. I don’t have a crystal ball, but this is my opinion. It doesn’t make sense. I think that the next, we will see what kind of magic the Fed pulls out of their magic hat, but I think they’ve got themselves into a situation where they’re scratching their head and they go, “Wait a minute, if we drop interest rates right now, what is that going to do to the market?” Well, according to Barbara Corcoran, home prices are going to soar, if you don’t buy now, you’re going to miss your golden opportunity. I don’t even know who is she talking about that can afford higher home prices? Let me just say this, how long have you been a real estate agent?

Caller 7:

Two and a half years. 10 years corporate sales before this. Six years for for InCorp also.

Todd Sachs:

Okay, just so I can contextualize. So here’s the thing. People couldn’t afford it where the prices are right now, when interest rates were 4%, they couldn’t afford it. They needed mom and dad, first time buyers needed mom and dad to give them 50,000, 80,000, $100.000. That’s not affording a house that’s getting bailed out by mom and dad. So if we look at it and we go, “Okay, well if interest rates drop to 4%, 5%, they’re not. But if they do, what is that going to do?” They couldn’t afford it then, they’re not going to afford it now. The only difference is mom and dad are going to have to look at it and say, “Do I have enough money to even live if I give you another $50,000, if I give my kid $50,000 to buy a house right now?” They weren’t helping the situation. They exasperated the situation by helping their kids a lot of times. Look, they just bought a permanent donation, monthly donation to their kid. Now they’re going to buy their kid a heating and air system.

Caller 7:

Yeah, it’s definitely interesting because the buyer curve path shifted downwards as interest rates have gone up because it’s definitely moved the buyer bell curve itself. And at the same time, like you just mentioned, the multi-generational housing, it is pretty solid up here. We have a lot of migrant work and we have Microsoft, we have Amazon out here. We’re a big tech central area. If I have a house that has a second bedroom in it, that second primary, that’s going to be a huge seller right then and there. But at the same time, I’m having conversations with my clients and they can’t afford now to take that money out of their house and actually give it to their-

Todd Sachs:

Victor, let me ask you a personal question. What are you going to do?

Caller 7:

What was that?

Todd Sachs:

What are you going to do?

Caller 7:

In the market, I’m staying in.

Todd Sachs:

You’re going to make it?

Caller 7:

Yeah, I’m a full-time agent. I’ve been doing this for two and a half years. I had 10 years in corporate sales before this. This is sales-

Todd Sachs:

You probably made a paycheck in your corporate job.

Caller 7:

I just had a call with them actually couple weeks ago and the door is still open, but at the same time, my clients, they rely on me. And this is more of a personal mission at this point in time. I haven’t made quite nearly as much as I did in my old corporate sales job, but at the same time, I am out here putting my nose to the grindstone and sticking it out.

Todd Sachs:

I respect that man, so am I. I mean, I respect that. I mean, you’ve got to be brutally honest with your clients and you got to have to put their needs in front of yours and it’s hard to do when you’re sitting there going, “Oh man, I need a commission check.” And I don’t know what a lot of agents are going to do. I mean you sound like a good one. You sound like you’re digging in and that’s good. I commend you for that. You’re not cheerleading what a lot of people are still trying to do. I mean I see the posts all the time, “Hey, the interest rates dropped a quarter of a point. You better hurry up now guys. You better jump in. You better buy the house. You better make, what you better do is you better make a checklist and if the house doesn’t check 90% of the boxes, you better not buy it. That’s what you better do.”

And the boxes have to be, you need to look at that house and say, “What’s this house going to cost me in the next five to seven years that I live in it and can I afford to fix things when they break?” And if you don’t do that, you’re in big trouble. But anyway, we appreciate you, man. Keep in touch with us, Victor. We want to keep an eye on you, man. We want to know that you’re doing well out there and so keep checking in and in fact send us an email with your-

Melissa LeVie:

Yeah, I’m going to reach out to you anyway.

Caller 7:

Thank you very much guys. And like you said, I really think it comes down to being able to say, “I don’t need this sale.” And that’s really going to make or break the people in this industry right now. If you could say, “I don’t need this sale,” you’re going to be able to survive. So thank you very much.

Melissa LeVie:

Victor, thank you.

Todd Sachs:

All right, thank you. We appreciate you. We got two callers on deck. We’ll try and be quick with this. It’s getting late guys with 2 hours and 15 minutes into it and it’s late on the East Coast. So let’s go ahead. We’ll take real quick. Rob, how are you buddy?

Melissa LeVie:

Rob, hi.

Caller 8:

Doing well. Thank you for taking my call here.

Todd Sachs:

No problem buddy. I saw you sitting there. We didn’t want to ditch you.

Caller 8:

Yeah, thank you. So I’m in Colorado and me and my family have gone through a major tragedy. Our house in Pine burnt down in January, and it’s a horse property, a small horse community and it’s been a struggle with the insurance company. We had encroachments on the property as we found out, and then we had asbestos abatement. It’s turned into a major project. Our builder came in $400,000 over budget from what he told us it was going to be. So we are GCing it ourselves and at this point I’m almost to the point where is it even worth it to rebuild the house or just turn over the property back to the mortgage company? We’re kind of at a standstill here. So I mean, I really don’t know what the market’s going to do, where it’s going, where it’s been, whatever.

Todd Sachs:

Where do you live in Colorado?

Caller 8:

It’s in Pine, Colorado, just west of Conifer. I don’t know if you’re familiar-

Todd Sachs:

I’m not familiar with that area. What’s the market like there? If you go through all this, is the house going to be worth it?

Caller 8:

So we bought the house about five years ago for 550, refinanced to get a lower interest rate two years ago, appraised at 775. Zillow is showing at 850 right now. It’s going to cost 1,000,000 to rebuild the house and that’s not counting the property, the barn, septic system, well, driveway all of that. So we’re kind of, if we rebuild the house structure and it’s going to cost us 1,000,000 to do it, is it even worth it? I mean by the time we spend $1,000,000 and rebuild the house and appraised for 750 or whatever, I mean after it’s said and done, is the house going to be worth 1,000,000? Is it going to be worth 550? I mean, we really don’t know what to do at this point.

Todd Sachs:

Well, you don’t want to put yourself in a situation where you’re going to lose it anyway after you do all that. I mean that’s what you really have to weigh out. Look, I’ve had clients that have gone through, I mean, not exact situation where their house burned down and their contractors coming in 400,000 over budget, but I mean if all the money, if you’re going to be in $1,000,000 into this thing, is that feasible? Unfortunately, and look, I can’t give you legal advice and things like that, but friendly, I would have to sit down and say, “Look, what is my current situation? What’s my credit like now? Has my credit gone downhill? How much is it going to affect me to let this thing go and rebuild?”

There’s a certain amount, man, of somebody that’s been through a couple major downturns in the industry, I mean, look there, I can remember having a big builder when I was a prime contractor for a big builder owed me a lot of money and man, they didn’t pay me. And I mean, I know what it’s like to go through some tough times. Sometimes, man, it’s just not worth it. It’s like you make yourself sick worrying about it and sometimes there’s a relief in just cutting bait and just getting on with life. It’s not going to… What you don’t want it to do is put you in the ground, right? I mean you can’t worry about that. So it’s only a house. It’s only, at the end of the day, it’s only credit. It’s only, I mean, look sometimes life itself is more important and peace of mind. So you’re in a tough spot. I mean that’s a hard decision, but if I were thinking about it, I would have to weigh hard the upside and the downside of trying to make this thing work or just letting it go.

Caller 8:

Right. And I got you there. We finally got to a point where the insurance company wanted to save this wall and that wall and whatever, and then after the asbestos abatement and everything, the insurance company finally gave in and they paid up and we’re sitting at probably around 900,000 as far as what the insurance company has paid out after parting ways with the general contractor. I did general it myself. I tore it down all by myself, hauled it all out all by myself. So I mean, we’re sitting with the foundation, we’ve got the framers ready to go. I think we can do it. It’s a lot of work and I’m okay with it. The family loves the property, loves the house. We don’t plan on going anywhere, but I’m just concerned in 10 years from now when the kids get older and I’m older and ready to move on and downsize or whatever, is it really worth it to put that kind of money into it at this point? I don’t really know where the market in Colorado right now is going.

Todd Sachs:

But the insurance is going to pay all that, pay you 900,000 of it?

Caller 8:

Yes. Yep. They’ve already paid it. Obviously that money had to go to the mortgage company because we don’t own the property outright obviously. So they’re dispersing it as we submit our-

Todd Sachs:

But you said you only owed 700,000, so they’re paying 900,000 to build your house again. So you would still have a $700,000 mortgage, right? If that’s the case.

Caller 8:

We’re actually at 550 right now. They’ve paid 875 is what the mortgage company is holding to rebuild at this point. And I’m figuring it’s going to probably be 900,000ish to 1,000,000 with the overages and whatever goes along with building a home so we’re-

Todd Sachs:

Can you build a smaller home?

Caller 8:

Well, we’re having to rebuild over the same foundation. That’s kind of the problem that we have to keep the foundation because it was salvaged.

Todd Sachs:

Make it a one story. Is it a two story? Make it a one story.

Caller 8:

It is a one story with a garden level walkout type layout. So I guess my biggest question for you guys, and obviously nobody has a crystal ball and nobody knows where we’re going, mountains of Colorado are pretty desirable, but is it really, I mean, are we going to see things go bad and then go good again? Or are they going to stay bad for 10 years? Are they going to stay bad for five years? I mean, I-

Todd Sachs:

Yeah, that’s a crystal ball outlook. I mean, I think that we’re going to see things continue to deteriorate over the next couple of years unless, like I said, unless we all of a sudden see wage growth go up or we see them put interest rates back to 3% again, which I don’t see happening. I think we could easily be, at the very least, flattened off for a decade. I mean, if we didn’t have any kind of a major downturn in pricing, which I still think we will, but I think things just flatten off at the very least for a decade, sure. I mean, I don’t see another wave of growth like we’ve just experienced. I just don’t.

Melissa LeVie:

Well, I was just going to say, you kind of look at your future too. You look at, you said you had children, kind of say, where do we kind of see ourselves going forward in the property? Do you see yourself maybe even doing multi-generational living as the children get older? What is the future there? Because that may paint just a clearer picture of what you see for your future as well.

Caller 8:

Yeah, that’s a great point. As we see our kids getting older, and that’s kind of the floor plan that we’re trying to lay out is the basement for the kids because they’re not going to be able to be able to go out and get a mortgage on their own.

Melissa LeVie:

Yeah.

Caller 8:

They’re going to be staying with us probably until they’re 22, 23 years old even at this point. These younger kids and this younger generation, they’re not going to be able to buy a house like we did when we were 23 years old. We went out and we picked up the old HUD home and fixed it and lived in it and whatnot. But this isn’t happening for this generation.

Melissa LeVie:

Yeah, that’s stuff that I would think about because you’re so in the immediate, what’s happening right now, it’s very unsettling I’m sure. But I think if you kind of just looked at what the future was going to be like and then thought about your children and it sounds like you love the property, it sounds like it’s a beautiful area. You may be sad even to leave that. So just my 2 cents.

Caller 8:

Well, and that is absolutely true, but we have to think about me and my wife’s retirement and when we are done working and whatnot, and is this something that’s actually an investment? Is it something that we can sell and make money on or is it something we’re going to sit on for the next 10, 15, 20 years before we even see any kind of return on it? I don’t really know. This subdivision, our house was built in ’77. Most of the homes in the subdivision are around that age. So being that it’s going to be a new build, it’s going to put above and beyond all the other homes in the area, which is a good thing. But is it enough of a thing? If that makes any sense.

Todd Sachs:

Yeah. I mean, I’m not one to think that you should build it for your kids. They want their own things in life anyway. They certainly don’t necessarily want to be living with you for the rest of their life and you need your money and you need to survive and things like that. And we grow these kids up that they can go out and make a living on their own. I mean, that’s just me. And I think one of the best things in the world is that they, at certain age, they get kicked to the curb and you’ve done your job and you have to have your life at that point. I mean, that’s just my personal opinion on things.

And hey look, if multi-generational, I know multi-generational families are getting back together and doing things, but what we’re seeing is not that kids stay living with you, what we’re seeing is that you start living with them because when you’re 70 years old, you can’t afford it and you want to be around and if they’re lucky enough to want you around, they’ll move you in and let you contribute to paying the mortgage. But we’re not seeing where people are buying houses to move their kids in. I mean, that’s the worst thing in the world in my opinion, to do. Let the kids move back at home, if they need to, for a period of time. But would I make a buying decision that is going to accommodate a 22 or 23-year-old? I wouldn’t. I mean that’s, I can’t tell every parent’s got their own thing, man. But as far as I’m concerned, I would say no to that.

I’d build a house that’s comfortable for you. I’d reduce the size if I could and make it work within the money that the insurance company’s going to give you. And then, because you can make it too nice, if the houses in the neighborhood are in their seventies and that’s the style and things like that, you’re going to overbuild and they’re just going to pull you down. And you never want to be the overpriced house in the neighborhood from an investment standpoint.

But look man, we appreciate you calling in. We wish you the best and we’re going to take one more caller so we can get out of here. We appreciate you, man. Keep watching.

Todd Sachs:

All right. And then we got, well finally, what’s up man? What you got? Where are you calling from?

Speaker 5:

San Diego.

Todd Sachs:

San Diego. One of my favorite places to visit. It’s nice and chilly in the morning and gets nice and beautiful in the… You guys have that, what is it, the Gaslamp District?

Speaker 5:

Gaslamp district in San Diego proper downtown. Yeah.

Todd Sachs:

Yeah. So what’s going on man? What can we do for you?

Speaker 5:

I wanted to just give a comment. I know everybody wants to get into a home and it seems like we’ve all been conditioned to do that. You may not recall, I called in last year about this time and a really heavy set case of buyer’s remorse. That’s my predicament. And for those-

Todd Sachs:

I do remember.

Speaker 5:

-that are looking to buy, let me give you a couple of numbers here. My parents bought a home in 1990, brand new home, four plus three, about 1400 square feet for 187,000. My father was the sole income provider and he made 50,000 annually in 1990. In today’s money, that’s about $125,000. That’s more money than I make by a little bit. That house today is valued at about $850,000. So I think you see where I’m going with this. Just because your parents did it or your relatives did it, or your friends can do it, I understand the need to want to buy a house and to have your housing costs fixed and to not rent anymore, but if the math isn’t adding up for you, regardless of the situation, whether it’s new, whether it’s old, whether it needs work, if your debt to income, if your loan to value, if that’s not going to add up and you’re going to be comfortable, don’t do it.

And have an investment portfolio that’s diverse in other ways until you can maybe buy some real estate or maybe buy in another region. If you’re in the west, like I am, look into buying something in the Midwest or the East or something like that. If you’re trying to look for a place to invest your money because you’re looking at it as investment. But I would say, specifically in California, renting is the way right now. If you can, if you’re comfortable. So I just wanted to add that in. And I don’t want to keep you guys any longer [inaudible 02:28:48]

Todd Sachs:

No, you’re the voice of reason. Certainly appreciate you, man. We thank you for supporting our channel and watching and commenting and calling in, and we wish you the best.

Speaker 5:

You too.

Melissa LeVie:

That was really good though. I really love hearing from our people and just really good format tonight.

Todd Sachs:

We did have, really quick, we did have some super chats in there.

Melissa LeVie:

We did.

Todd Sachs:

Did we cover them? Can we just address the super chats?

Melissa LeVie:

Yeah. Let me cruise through these really fast.

Todd Sachs:

And I’ll tell you what, if we can.

Melissa LeVie:

Love this atmosphere.

Todd Sachs:

All right, thank you so much.

Melissa LeVie:

Thank you.

Todd Sachs:

Yes, thank you. Thank you.

Melissa LeVie:

Got Charles again. Isn’t it that if you bought last year in 2022, you won’t even start to break even on costs from overpriced homes for 13 years. Sounds like 2006.

Todd Sachs:

Yep, that’s true.

Melissa LeVie:

Oh, I forgot.

Todd Sachs:

It’s going to be 13 years before you’ll be able to sell. Yes. So I think what the study was that was put out was that yes, if they bought within that time period, if you bought in the last year or two, it will take you 13 years to be able to sell your house, to be able to get out, walk away from it with your money. So yes.

Melissa LeVie:

And Charles goes on to say, “Oh, I forgot to say my Uber driver to the airport on Thursday, told me she had been a realtor for almost two years and isn’t going to renew her license.”

Todd Sachs:

Yeah. Charles, thanks for your super chat through. We appreciate you, man. And that, and we’re seeing that a lot. In fact, a friend of mine down in Tampa, I don’t know whether he’s on watching right now, but we just had a conversation and he’s looking at getting a full-time job and these are guys, these are some good guys too. I mean good realtors that have really, they’re just struggling too. A lot of people in the industry with sales down, believe me, they’re not all bad. As much as people are angry at agents, and I get it, I do understand we have a lot of trust to earn back in the industry. It hasn’t always been that way to where we made it very low barrier of entry to get in. And then leaders just haven’t been doing their job, brokers haven’t been doing their job, managers haven’t been doing their job.

They replaced the client, the buyer and the seller. They put the real estate agent as the client in these brokerages and they made them the focus, the profit center and instead of protecting the buyers and the sellers, the clients that really make it happen. And we did a very bad job in our industry over the last several decades and we’ve got a lot to get back. So I welcome the change. I think the transparency is welcome. It’s good. And I think that you guys, we appreciate you watching our channel and if you haven’t subscribed, you may want to consider doing that. We’d appreciate it. Hit the alert bell. You’ll know when we upload content just like this. Melissa, thanks for putting in the extra time tonight. And Joe.

Melissa LeVie:

Yes, gladly.

Todd Sachs:

We appreciate it.

Melissa LeVie:

Yeah, it was wonderful. Thank you guys so much. Really, really awesome show.

Todd Sachs:

Yeah, and guys, the biggest compliment you can do for us is to share the video.

Melissa LeVie:

Yes.

Todd Sachs:

Because a lot of people need to hear this information and this is not what you’re hearing on mainstream media. Guys, and look at the participation. I mean, look at the stories, the lives, the people, the real people that are out there, that’s what it’s all about. I believe there are more people, good people out there than there are bad. I believe that. But we can share this type of content and really help a lot of people. I feel really help a lot of people. And guys, worst case scenario, it’s just some precautions out there, just to slow down and make sure you’re doing the right thing and that you’re thinking about things. And we love you. We appreciate it. And have a good night.