Correlation Between the Housing and Land Market (LA 1342)
Correlation Between the Housing and Land Market (LA 1342)
Transcript:
Steven Butala:
Steve and Jill here.
Jill DeWit:
Good day.
Steven Butala:
Welcome to The Land Academy Show, entertaining land investment talk. I’m Steven Jack Butala.
Jill DeWit:
And I’m Jill Dewit. Broadcasting from gorgeous sunny, Southern California.
Steven Butala:
Today, Jill and I talk about the correlation between housing data and housing information that we’re getting right now from every angle, in a land market. There’s all this stuff about housing. Everywhere you turn. Unemployment’s this, forbearance here. Housing market’s on fire and mortgage rates are almost zero, and on and on and on. How does that affect the land market? Believe it or not, it’s almost a one-to-one, I believe, a one-to-one correlation. I’ll get into the details, but here’s a couple of real simple examples. A tremendous amount of potential development, farmland, agricultural land, in Maricopa County, Arizona, is getting acquired right now. I micro watch that market. Because of the price can command it. And because the financing is available. The institutional-type financing from big home builders.
So what does that mean to us from a land perspective? All these little infill lots that nobody cares about are still the same price. You think that a person who owns a home thinks that their little infill lot, or the two infill lots, that, for whatever reason they inherited, is worth any more this year than it was last year? No. And they couldn’t be happier to sell them. So, when you follow these markets and you say this market’s on fire … Placer County, California, is another one, that’s where Lake Tahoe and Truckee are. Are essentially because of technology, a commutable subdivision of San Francisco, on fire. Fantastic place to buy land and infill lots and everything else.
Jill DeWit:
Do you know what I believe? I’ve been waiting to say that.
Steven Butala:
Why is that?
Jill DeWit:
Because you just say, ” I believe”, and I’m like, well, I got something I believe too.
Steven Butala:
I don’t even know what I’m saying. I mean, I know exactly what I’m saying. Have no idea how I’m really coming off presenting it. It’s Jill’s job to say, dude, you’re just, you got to stop that.
Jill DeWit:
Yeah, that was embarrassing. Just kidding. No, no. I was going to give you a compliment. I believe you, because I don’t know anybody that knows land like you.
Steven Butala:
Oh, that’s nice.
Jill DeWit:
You’re welcome.
Steven Butala:
Well, let’s just end on that.
Jill DeWit:
There you go.
Steven Butala:
Before we get into it, let’s take a question posted by one of our members on the landinvestors.com online community. It’s free.
Jill DeWit:
Irwin wrote, “What is the best way to buy property tax foreclosed land?” Thanks. Take it away Steven.
Steven Butala:
Well, that’s an interesting question. Where do I start? I could write an entire book on that, like a book series. There’s a lot of ways to buy tax foreclosed land. It could be he or she. What they’re talking about is this. People die and they don’t pay their property taxes. That’s usually because they die. Or in some cases, a very, very few small percentage, less than 5%, 95% of the reason property taxes get foreclosed on, property taxes now, are because people pass away and their heirs never knew, or they don’t have any heirs, or things like that. And a few other cases, it’s just because they don’t want the property anymore, which is actually good for us.
So what’s the best way to get a smoking deal on this? First thing you need to do is go do a tremendous amount of research online and you’ll be shocked and amazed at what you can buy in your little area, wherever you are. If you’re in Indiana, that state and those counties have a way to divert this property comes up every year. In some cases, in Texas, every week. The first Tuesday of every week in Texas, from a statute standpoint, each County is supposed to hold a gavel auction on the County steps. Do they do that? No. Some counties have stuck their middle finger up about that to the state, forever. But some of them do. And there’s one law firm that handles it all and it’s surprisingly centralized for some of the larger counties there. And so my point is, you’ve got to do a tremendous amount of research to find out where you can do this effectively that makes sense to you. And then what you’re going to do with it after you sell it?
You know, Jill and I regularly, we obviously send out all these letters constantly, these mailers. And we’re regularly getting calls from people, usually above 70 years old. They’re usually men, who say, “I’ve been collecting this land at the County tax sale my entire life. I have 9 million properties. Would you like to buy them all I’m ready to sell.” So if you eventually want to be those old people that has just a treasure trove of land, it’s not hard. It’s just takes a lot of research. And with the tools now, I was just looking at the tools that are on DataTree and Realquest, and TitlePro Black Knight. You can check liens, you can check for HOAs, you can pull property reports on just about any property in the country, regardless of its type and get right to the bottom of it. So that was a real risk in the past buying foreclosed on or back-tax prop, we call it back tax property.
You don’t know what’s coming with it. Does it have an IRS lien on it? Does it have a child support lien on it? There’s a lot of stuff. And so in the end, what I decided a lot of years ago is I’m just going to go for it. And if it’s very predictable, a small percentage of those properties are going to have issues. So I just nicked that one for morbid and rolled it into all the profitable ones and I just forget it.
So, what’s the best way to buy back-tax property or foreclose land? Do a tremendous amount of research. Buy all the books you can possibly buy on Amazon, but focus on one area. Don’t focus on the whole country because the rules are entirely different County to County, and in some cases, city to city. There are cities in Oklahoma that have hordes of property that they’ll give away. I could spend-
Jill DeWit:
Hours.
Steven Butala:
… an entire week at a live event, hosting a live event, talking about this, and everybody would go away with property by the end of the week. And I’m not tooting my own horn. I started this way.
Jill DeWit:
Maybe we’ll do it. Just a thought.
Steven Butala:
It’s not crazy.
Jill DeWit:
That would be another, hmm. That could be something for our next live event in March. That would be very unique.
Steven Butala:
A module. Yeah.
Jill DeWit:
Yeah. You know what? I’m writing that down right now for our March live event idea.
Steven Butala:
It ended up, this is truth time.
Jill DeWit:
Truth time.
Steven Butala:
This is a personal story, like last Monday, I’m like, why does everything become a personal story? So here I am breaking all my rules, my own rules. So Jill and I have three kids. The third one just turned 17 and he has famously since he’s been little said, “This is stupid. I don’t know why you guys talk into a camera every Thursday. Land is dumb. I don’t care.” Guess what he’s doing now? Buying back-tax property and reselling it on the internet. And the other two kids are full-blown, full-time working for us. Stuff works.
Jill DeWit:
Took them a little while to figure it out.
Steven Butala:
Now, if you kids are listening and I’m sure they’re not. I’m glad. Jill and I have been secretly saying this forever, “I want you kids to work for us. I want you to-”
Jill DeWit:
I want you to take this over.
Steven Butala:
“I want you to take this whole thing over and make it. I want you to quadruple-
Jill DeWit:
What we did.
Steven Butala:
“what we are doing and will do.”
Jill DeWit:
Exactly.
Steven Butala:
That’s what this is all about. That’s why we fight.
Jill DeWit:
Yep.
Steven Butala:
Today’s topic, the correlation between the housing data, all this data, the housing data and the media coverage on real estate itself, the housing market and land. This is the meat of the show. Should I just keep talking?
Jill DeWit:
Yes, please. I’ll just take some notes.
Steven Butala:
Every Thursday, at three o’clock Pacific time, we hold our weekly webinar for our Land Academy members and House Academy members. And I start the whole thing off, after Jill tells a bunch of jokes, I start the thing off by giving everybody an update on the housing market and what’s happening for House Academy members, to help them and help us decide where to send mail to buy and sell houses wholesale. And it’s become this thing now where it’s like, everything else in the world right now, it’s on steroids. The housing market is on steroids. I’ve never seen anything like it. The days on market keep going down. The year over year statistics on available inventory and average pricing, and all of it, just keeps skyrocketing. Or however you see, you know, inventory goes down, prices go up. Demand keeps going up, supply keeps going down. Mortgage rates keep going down. They’re the lowest they’ve ever been since World War II.
Jill DeWit:
I love the data. The data is getting better and better and better too all the time.
Steven Butala:
People are moving. Because of the COVID, people are moving out of big cities into more rural environments. Well guess what? We’ve been buying and selling a rural property, both houses and land since it was way before, decades before, it was fashionable. So we’re qualified to look at this data and talk about it and say, you know what? I’m pretty sure this is what’s going to happen over here. And it does it. We are giving ourselves some credibility, but more importantly, it’s our predictions, our predictability factor, and the confidence in that, is going up in our groups. Which was why we’re here. We’re here to say, that’s a good idea, that’s a bad idea, like your parents would.
So the question is, there’s just never been more data than there is now about the housing market and it’s trends and it’s broken down by zip code in some cases or better, sometimes census tract. The question is no one ever talks about land and no one ever will. For some reason, people just don’t ever talk about land, which was one of the reasons I went into it in the first place. Because it’s just like this forgotten product type over here, but then you hear all these stories about, well, the guy that has all that land, he’s a bajillionaire, but he’s never made the media. No one cares.
I love being that guy. I love being the guy that no one heard about, a bunch of dough and a bunch of land. So here’s the deal, the correlation between all this media and these houses and what’s good, these good markets and bad markets is almost a direct, in my opinion, direct one-to-one correlation. If properties are doing great in some of these, what are called zoom towns, like I keep bringing up Lake Tahoe is a zoom town, to San Francisco. People from San Francisco are moving to these outskirts and Lake Tahoe is just jam packed right now. Do you think that all these houses that are selling for twice what they sold for two years ago that affects the land values around? Yeah. Abso-freaking-lutely it does. Do you think that we plan our mailers around things like this? Hell, yes.
So pay attention in a big huge way to what’s going on with housing and where there’s more foreclosures, where there’s less foreclosures, which markets, for example, Las Vegas, because hospitality is getting really hit hard, just like travel is. I don’t think there’s a market that’s more dependent on hospitality anywhere in the world than Las Vegas. Stay the hell out of Las Vegas and Nevada in general, with land and houses. It’s tanking and it will continue to do so. And this is all housing data, but I know that that correlates right to land.
Detroit has been and always will be a terrible, terrible place to buy houses, be a landlord or buy land. Just stay out of there. Phoenix is going to get hit hard during this recession. So I’m not so sure that’s the best place to buy land. California, it’s never been bad. California is one of the least recession-proof places I’ve ever experienced.
Jill DeWit:
Most recession-proof.
Steven Butala:
I’m sorry, most recession-proof. I just read a GDP, gross domestic product report by city and California’s always number two to New York.
Jill DeWit:
Right.
Steven Butala:
Did you see that?
Jill DeWit:
Nope. I did not read that one yet.
Steven Butala:
That translates to a really healthy, diverse population base and industry base and consequently housing base. There’s something for everybody in California, based on your salary. It may not be what you’re used to do, square footage that you’re used to, or any of that, but it’s here.
Jill DeWit:
It’s true. It’s interesting. Trying to think what questions I want to ask you. So, what do you think about timing? We used to say back a couple of years ago, there would be a lag between what happens in the housing market and then the land market. Is it a shorter period now? Or is there still a good, healthy, lag time?
Steven Butala:
So that lag that Jill’s talking about, is historic. That’s a great question.
Jill DeWit:
Thank you. I am listening.
Steven Butala:
Historically, which is shocking in and of itself, and that’s your problem not mine.
Jill DeWit:
Exactly.
Steven Butala:
There used to be a lag between vacancy rates, is what she’s talking about. And you know, everything historically would start with residential housing, and houses, and then apartment vacancies, and then it would go to commercial and then land would be last. Well, this market that we’re in now, is such a unique scenario. It’s apples and oranges now because of forbearance. Forbearance is a word that I learned around March of this year. It’s something that Congress came up with so that people didn’t have to pay their rent. It’s in lieu of foreclosure. Used to be up until very recently, if you’re very young, you’re not going to know what foreclosure is. Forbearance is this step that they jammed in-between everything’s going great, I’m paying my mortgage, oh my gosh, I lost my job, I’m going into foreclosure, I’m losing my house.
Congress jammed a thing in-between it called forbearance. Yeah. We’re not going to foreclose on you. I get it. There’s the COVID, we’re all kind of in this together for better, for worse.
Jill DeWit:
We’ll talk about it in December.
Steven Butala:
Yeah. So you don’t have to pay, you don’t have to pay your rent. You don’t have to pay a mortgage for, let’s just say, 90 days. Well, they just extended it another 90. They’re going to extend it again another 90. They’re kicking the can down the road. Eventually, the bank is going to foreclose on that property. I don’t care if it’s an office building or it’s a primary residence and everything in between. So, Jill’s question is, there was a lag. It was houses first and then commercial and then land was last. Forbearance threw that out the window, in my opinion. It’s all happening now.
Jill DeWit:
Cool.
Steven Butala:
The net effect is artificially propping up, both the demand and the finance-ability of properties. The demand is higher and the finance-ability of properties is higher and it continues to go up. But this forbearance to foreclosure is going to stop at some point after the COVID. The election probably has a lot to do with it. Please don’t make any comments on that on YouTube. That’s not why we’re here. We’re talking about real estate. And once foreclosure takes over forbearance sometime next year, late 2021, you’re going to see a deflation in values. Is that going to happen directly with land? Probably not. We always buy land cheaper, always.
So the thing is, you know, and here’s my end comment. People in our group, and Jill and I specifically, I don’t care if it’s good times or bad times, we buy property really, really, really cheap. We buy land for 20% in most cases of what we think it’s worth today. And we sell it for about 50%, so the buyer’s got a smoking deal. All that happens is this. It just goes up and down a little bit. That’s it. The market can go like this with housing.
So when I say there’s a one-to-one correlation, what’s the correlation? The correlation is about where to do this. In Placer County it’s fantastic. Don’t please don’t send mail to Placer. I’m just using it as an example. Every large market, let’s say Seattle or-
Jill DeWit:
Texas, Dallas.
Steven Butala:
Dallas, they all have these little ancillary-type cool towns that are up until six months ago or eight months ago, used to be vacation spots. Well, everyone’s going to move there.
Jill DeWit:
Oklahoma.
Steven Butala:
Perfect. Everyone’s going to move there and stay there.
Jill DeWit:
Right.
Steven Butala:
Housing’s cheaper. Everyone’s online now forever. You know, you think that people at Google are going to go back to San Francisco to go back to work after this?
Jill DeWit:
In July.
Steven Butala:
Absolutely not.
Jill DeWit:
Could you imagine?
Steven Butala:
It’s not going to happen.
Jill DeWit:
They have a full year so they could do a lease somewhere else. Are they all going to come running back next July?
Steven Butala:
No.
Jill DeWit:
You know what I just heard? This is something interesting too, it just was announced today. I think it’s the Met in New York. They already said we’re not even going to open until next September. They’re skipping a whole season. And they’ve never done that in the history of forever.
Steven Butala:
Right.
Jill DeWit:
We’re going to see other things like that happening.
Steven Butala:
They’re are little vacation markets, all over LA County, like Lake Arrowhead and Big Bear. You should look them up. There’s lakes, it’s like out of the … Millions of movies have been filmed there. It’s right out of … You can’t buy a house there. You can’t find one. And if you do, it’s grossly overpriced. So these are great markets to buy land in.
Jill DeWit:
Yep. Awesome.
Steven Butala:
In a lot of ways, we’re in a perfect real estate storm. Data’s never been, ever, better than it is. So you have access to the greatest data ever. Some of the best demand that I’ve ever seen. And now you know exactly where to buy and sell a property. You think this is happening in central Indiana, Jill?
Jill DeWit:
Which part?
Steven Butala:
Is it a great place to buy land in central Indiana? I don’t think so.
Jill DeWit:
Right.
Steven Butala:
Nobody’s fleeing Chicago to go to central Indiana. They’re going to these markets that are like in the Ozarks where they vacation. Do you vacation in central Indiana? Hell no. There’s something wrong with you if you do. Do you do it in Northern Michigan? Yeah.
Jill DeWit:
Where are you going? Columbus. I hear it’s beautiful this time of year. I like gray. Gray’s my favorite color.
Steven Butala:
Yeah.
Jill DeWit:
Gray’s the new sun.
Steven Butala:
Cloudy is the new sunny.
Jill DeWit:
Exactly. Oh my gosh. Okay. Did you get that out?
Steven Butala:
Yeah.
Jill DeWit:
Okay. That was good.
Steven Butala:
Is that what it sounded like?
Jill DeWit:
No, I’m just kidding. It was really good though. Thank you for sharing all that.
Steven Butala:
Sure.
Jill DeWit:
Always appreciate your inspiration. Have you joined us today? Monday through Friday, you can find us right here on The Land Academy Show.
Steven Butala:
Tomorrow the episode on The Land Academy Show is called, Send More Mail, with Land Academy members Tom Belldecky.
Jill DeWit:
Dubishky.
Steven Butala:
Oh, Dubishky, right, he explained it to us, actually.
Jill DeWit:
And Patricia Zack. And they talk all about wifi.
Steven Butala:
That’s Jill’s way to say wifi, for some reason.
Jill DeWit:
It’s not my way. It’s the Ukrainian way. And you’ll hear-
Steven Butala:
They’re Polish.
Jill DeWit:
Polish, excuse me. Woop, boy, Polish. My sister-in-law’s Ukrainian. That’s where that came from. Sorry.
Steven Butala:
You are not alone in your real estate ambition.
Jill DeWit:
Wouldn’t it be horrible.
Steven Butala:
People are going to show up at your door-
Jill DeWit:
That’s okay. People are like, that’s okay if you call me Canadian or something.
Steven Butala:
Yeah. American Canadian, Mexican, whatever, it’s the same thing.
Jill DeWit:
It doesn’t really matter. That continent over there. Isn’t it funny? When you’re traveling, I don’t know why, the Americans get the bad rap, but the Canadians get the, “Oh, you’re Canadian.” Like what the heck is that? Like, I almost want to walk on pretend and say I’m Canadian. Because then it’s like, I might get a drink faster or something. It’s not fair.
Steven Butala:
It’s all about getting drink faster.
Jill DeWit:
Priorities, babe. Priorities. Thanks for tuning in. We hope you find our content valuable and we appreciate your support. If you haven’t already, please check out our YouTube channel and hit the subscribe button.
Steven Butala:
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Steve and Jill:
We are Steve and Jill.
Steven Butala:
Information.
Jill DeWit:
And inspiration.
Steven Butala:
To buy undervalued property.
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