Why We Have Not Missed the Housing Boom (LA 1635)

Why We Have Not Missed the Housing Boom (LA 1635)

Transcript:

Steven:
Steve and Jill here.

Jill:
Hello.

Steven:
Welcome to the Land Academy Show, entertaining land investment talk. I’m Steven Jack Butala.

Jill:
There was a long pause there. I’m Jill DeWit and we are broadcasting from the Valley of the Sun.

Steven:
Today, Jill and I talk about why we’ve not missed the housing boom at all.

Jill:
Personally or all of us?

Steven:
All of us.

Jill:
Good.

Steven:
This all comes from… Jill and I have children between the ages of, let’s say 26, 27 and 18, and all of them and all of their friends have all throughout their entire… Let’s call it late teens, early twenties have said, “Well, you guys are the generation or two generations before us. And thanks for wrecking everything.”

Jill:
“You guys are the last homeowners,” like, “Hold on a moment.”

Steven:
To which I say, “I said the same thing to my parents,” to which my parents have said, “That’s what I said to my parents.” 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. And if you… Oh, please don’t forget to subscribe, I should say, on the Land Academy YouTube channel and comment on the shows you like.

Jill:
David wrote, “Could someone give me some insight? I’m closing on my first deal. It’s a 9.37 acre parcel. And in 20 days, there’s not a ton of comps in the immediate area, and I was originally thinking about trying to sell it for around 30 to $40,000. But I’ve been doing a deep dive on research and looking at active listings. I noticed two neighboring parcels at 1.4 and 1.3 acres sold at 10,000 an acre, but it took four to six months. I’m very tempted to list it for $79,900. Even 70% of 10,000 acre at 65,000 and some change I would be thrilled with. I don’t want to get crazy and list”… Oh, “I don’t want to get crazy and list too high”-

Steven:
That was my fault.

Jill:
“And have to sit and/or not sell. Am I getting too excited with the neighboring properties? I’m licensed. I’m probably going to list it myself. So, if I can get the buyers and save some money… But I’m tempted to consider using a local realtor. The MLS might be different than the local one, and I might assume a local realtor who’s any good would have a better handle on the prices.” Is that the end of it?

Steven:
Yeah.

Jill:
So, do you want to go first?

Steven:
Congratulations. This is working for you. I’m really, really glad. I mean it, you’re going to get through this first deal. It’s going to be a lot easier. You’re going to look back on it and say, “Wow, I learned a lot and I can’t wait for the second one.” Just like your first marriage. So…

Jill:
Why do you do…?

Steven:
I do it to annoy you.

Jill:
Just poking me all day long. Does this happen to you? Poke, poke, poke.

Steven:
It didn’t bother you. If you just sailed right through it and didn’t listen to anything I said, I’d never do it again.

Jill:
Because clearly you don’t want to get a rise out of me.

Steven:
Here’s a couple technical things, and a lot of people in our group in Discord commented the same way. Price per acre on small properties… We take a one acre property and it’s priced at $10,000. So, it sells for 10,000 and apply that to even an adjoining property that’s 10 acres or 40 acres… You can’t use that same number. [crosstalk 00:03:27] The higher the acreage number… If it’s 40 acres versus one acre, the price per acre’s going to be lower. It’s called the bottle case theory. When you buy a single bottle of Coca-Cola and then look at the case price, it’s always cheaper to buy it by the case. It’s just a pure economics thing. That’s why people who subdivide property for a living make hoards and hoards of money. If you take a 40 acre property and buy it for four grand and, theoretically, divide it into 40 properties and sell it for a thousand dollars each, now you…

Jill:
Buy four, sold it for 40.

Steven:
I’m grossly oversimplifying it. And Jill’s right. I mean, you can make billions of dollars, literally, subdividing property because of this reason. So, that’s number one. Number two, I’m an accountant, or a former accountant.

Jill:
Recovering accountant.

Steven:
And I don’t do my taxes. So, great. You’re a real estate agent, but chances are, if you go talk to a Whitetail person or somebody who’s done 40, 50, a hundred… Maybe got 20 years of experience by selling land in the area, there’s no chance, in my opinion, that you’re going to do as well as this person. That person knows way more stuff than you’ll ever know about that local area. So, please don’t list your own property to save some money.

Jill:
He’s also driving people around right now today and might have people on speed dial on his phone and would love it.

Steven:
They’re on horses having fun. So, do I think you should list it for this huge amount of money, versus just kind of doing it wholesale in the Land Academy way? I think you should find a great land broker in the area and ask that person.

Jill:
You know, I’m doing this exact thing right now, literally waiting for a guy to call me back. His first name happens to be Hunter. I found him online because he had some great postings. He actually did drone shots and stuff, too, for a piece of land in this area that is in the same state that I’m in, and we know the area, but he knows it better.

Steven:
Of course he does.

Jill:
So, check this out. So, I go looking for him, I Google him, he pops right up. I have his Facebook, he’s got a cowboy hat on and I called him and he answered the phone right away. And I’m like, “Okay, you’re my”… I didn’t even have to say it.

Steven:
I know who this guy is.

Jill:
Do you know him?

Steven:
Yeah. [crosstalk 00:05:36] I’ve spoken with him a couple of times.

Jill:
Oh, he’s young. And he’s really nice. And I said, “Hey, this what I’ve got,” He goes, “I’m your guy.” I didn’t even have to say it. And I said, “Don’t ever take that cowboy hat off.” And as I called him, too, he’s like, “I’m actually literally right now putting a sign in the ground on a piece of dirt.” I’m like, “Okay, we’re going to talk.”

Steven:
You know, there’s minor split properties in that area that you’re talking about that we use as examples for our deals. He’s a listing agent [inaudible 00:06:03]

Jill:
I love that guy. You want to use?

Steven:
Yeah.

Jill:
Oh good, well I’ve already got him.

Steven:
Well, I mean, there’s a slimy factor to him.

Jill:
He’s going to call me today.

Steven:
But, I mean, you’re a better judge of that than I am.

Jill:
Well, let me tell you, I’ve gone-

Steven:
He’s got a real estate license. I think he’s slimy. That’s just… I overreact on this.

Jill:
Let me go back. I’ve gone through a couple people and he’s the best I could find.

Steven:
I understand.

Jill:
And he’s moving property. That’s what I care about.

Steven:
He knows that market.

Jill:
He does.

Steven:
You know, just be, don’t-

Jill:
He put himself in there.

Steven:
Just don’t underprice it too much, because he will… Regardless of how… This is what I love about him. Grossly overprice it because he will sell it.

Jill:
Okay, good. Thank you.

Steven:
Good meeting, Jill.

Jill:
Thanks.

Steven:
Today’s topic. Why we haven’t missed the housing boom yet. This is the meat of the show. Three thing… Go ahead.

Jill:
Well, what I was going to say… It’s funny because talking with one of the agents that I passed on was the one that we had this whole conversation on. When I was trying to find someone that would answer the phone.

Steven:
Remember we were trying to buy that vineyard up there?

Jill:
Yeah.

Steven:
He was a listing agent on that.

Jill:
Really?

Steven:
That’s how I know him.

Jill:
Wow.

Steven:
I’m sorry, go ahead.

Jill:
Good for him. Well, you know what it takes, that’s what it takes. It takes these people being serious about their job and just going for it. And he’s got the energy and he’s going for it. Once upon a time, I had the energy.

Steven:
Exactly.

Jill:
And I went for it. And then after I got you, I gave up. I’m just kidding.

Steven:
You’re not the first person I’ve just sucked all the air out of. Trust me.

Jill:
There’s that? Oh, so it’s not my fault. It was you.

Steven:
Of course, it’s me. What’s the common factor?

Jill:
Oh, I feel so much better now. Why do I not have any energy? Let’s think. Maybe it’s who I hang out with.

Steven:
Of course, it is. So, we tell the kids, “Don’t get in a bad crowd.”

Jill:
It’s true. I did. Don’t do what I did.

Steven:
That’s a whole show.

Jill:
There we go.

Steven:
Sorry. Sorry. What were we saying?

Jill:
Anyway, back to the topic, which is you didn’t miss the housing… You did not miss the housing boom. Please tell us why.

Steven:
There’s three reasons. Number one, the population growth, very specifically meaning the number of people that are turning 30 each year… Each of the next three to four years, three and a half years, every month or every year is staggering. I can’t remember the exact number, but it’s in the millions. I think it’s 1.3 million a year. People are turning 30, which in the magic number to 30 is for whatever reason, that’s the number when people usually buy their first house. And so, we have all these new homers flooding the market. Number two.

Jill:
That’s true. That was right on time with me. Go ahead.

Steven:
Number two. The homeowners, home builders, like Shea Homes, the publicly traded ones, a massive… Like Toll Brothers, really large ones, even the regional ones, got so burned by overbuilding in around 2007 to 2011 and 12 that they reeled themselves in and their shareholders reeled themselves in to underbuild. Because we all knew that this was going to happen from a demand standpoint, because there’s aging in place. 2010, 2011 and 12, the kids that are turning 30 were 20 or the kids that are turning 25 or 15. So, we could see this demographic shift. That’s really number one. Number two is COVID. Everybody’s working at home and so they want a bigger house, and they’re also working on the internet. So, they don’t have to live in an urban area anymore. So, that rural sprawl is happening.

Steven:
And then finally, number three, interest rates… We haven’t talked about this, are the lowest in history. So, we have a lot of historical things happening. The regular mortgage is below 3% now.

Jill:
I love it.

Steven:
So, when we bought this house it wasn’t even like that.

Jill:
I love it.

Steven:
So, it’s kind of like this… No one’s ever gotten sent home and able to thrive financially and work at home.

Jill:
[crosstalk 00:10:08] That’s like rolling out the red carpet.

Steven:
That’s never happened in the history of the world. Number one. Number two, the world has never had a generation growth like this, population growth. And these kids are smarter. They make more money. They’re more educated. It’s all…

Jill:
Got the energy.

Steven:
Good. And then finally number…

Jill:
Not jaded by a marriage.

Steven:
Well, they’re probably on their first marriage, so it’s fine.

Jill:
Oh, there we go. They’re still in the newlywed phase. That’ll change.

Steven:
Kids haven’t destroyed their lives yet.

Jill:
There we go.

Steven:
And then number three, historically… When I was a kid, you’d get a mortgage for around 9%, you could get a mortgage below 10%. I remember my parents being real happy about that.

Jill:
I agree.

Steven:
And so, mortgages rates hit below 3%. Another historical… Never happened in ever. And then fourth… And this is just my personal addition, I’m nowhere stretch near an economist. The regulations that came out of the bad loans, the subprime mortgages and the predatory lending from 2007 to 2011 or 12, got rectified and solved with government intervention. Most of the time, I’m a big fan of government. Stay the hell out of my life. But in that case, I really think it worked out pretty well. They reeled these lenders back in, capped their compensation and made them behave. And I think that’s creating longevity.

Jill:
I agree.

Steven:
So, did you miss it? No, but here’s the thing. I’ll speak to investors and I’ll speak to this new buying generation. This new buying generation needs to stop the damn whining. I mean it, and it’s not millennial specific. It’s not millennial specific. I said [crosstalk 00:11:48] I can’t afford anything. I can’t live… There’s no such more affordable housing. I want to live in downtown Seattle, but I can’t afford it. You can’t afford it. You’re right. You can’t afford to live there. So, go live where you can afford, like we did, like our parents did. Make a ton of money. Raise a couple of kids as well as you can, and go buy your dream house. You just can’t afford it right now. So, stop the whining.

Steven:
For all investors, buy it. Buy it up, man. We just saw this Zillow thing implode on itself. They went and bought thousands and thousands of houses. $1.3 billion of houses in the best real estate market in the history of ever. And they screwed it all up. Why? Because they’re tech people. They’re not real estate people. We’re real estate people. We know what we’re doing, by the way.

Jill:
I have two things to add. One is… hang on a second, I’m going to write this down. And then “B” is this article I read today. You’re not going to believe what’s coming. So, I just had this discussion again with this real estate agent. For those of you who know what I’m talking about, I don’t think she ranks that high in the prettiness scale, like I put in Discord. So, I’m not sure how well she does. So, it was really funny. There was a funny thing on Discord that I put in the… in the rant section, because it was cracking me up. Apparently, there’s a direct correlation to selling a home and how attractive your agent is. They did say it will sell, probably a better amount, but higher days on market. I’m not kidding.

Steven:
So, there’s hotness to days on market correlation.

Jill:
There is, there is actually… I screenshot this because my jaw hit my desk. So, I did a screenshot and put that in there because I’m like, “This is hilarious.” So anyway, someone commented in Discord and said, “That’s it. I’m firing my partner and I’m looking for that trophy.”

Steven:
Trophy partner. I saw that.

Jill:
Totally. That’s so good. But anyway, this agent who had also moved here from LA, she was falsely saying that she was… Some of the conversation that she’s had I agree with and some of them I don’t. She was falling into the, “Oh, I can’t afford to get back in there.” I’m like, “Yeah, you can.” People leave areas. People think that, “Oh I can’t”… You’re not raising this market. You’re not in that market. You have to start somewhere. You just get in there and you start making enough money to make it happen, so…

Steven:
It’s a personality flaw and nothing else. Turn the news off.

Jill:
She’s like, “Oh, I could never go back.” I’m like, “Sure, you can. Where do you want to live?”

Steven:
Turn the news off. Turn all that stuff off. Stop reading all this negative stuff.

Jill:
Here’s my other point. And I’ll leave it on this for me. There’s an article I was reading about just today, in LA. It’s LA City or LA County. But this is a regulation thing I don’t agree with, but they’re actually considering to vote on Friday tomorrow, a preliminary vote to go down the path to try to keep Zillow and these iBuyers from buying properties in Los Angeles because they’re beating the general public to them.

Steven:
I mean, not one word of that surprises me at all.

Jill:
Unlike what?

Steven:
Large municipalities like that believe that they’re saving everybody from themselves. And they believe that more rules are better. Nevermind. They’re all just idiot politicians that don’t have any real life experience. And they’re altruistic. They’re going to save everybody.

Jill:
I was like, “Are you kidding me?”

Steven:
Here’s how you save somebody, by the way. You tell them a couple of sentences like this, “You’re on your own. Good luck. Here’s a ton of resources. If you need any help, let me know. Otherwise, you’re responsible for your own stuff.”

Jill:
Go get a good job, get a good education, get a good job, whatever you want to do.

Steven:
And isn’t it great that we can do that? Because, unlike any other country in the world, we don’t have a choice like that. Wasn’t that long ago, there was a red sickle and been missiles pointed at us. And in that country you had no choice. You’d sweep the streets. That’s the only job you’re ever going to have. So, everybody complains about a lot of stuff in this country, but we have choices.

Jill:
We have a great… It’s great here. You’re right. Happy you could join us today. Five days a week. You could find us here on the Land Academy and House Academy and whatever Academy Show.

Steven:
If that rant wasn’t enough-

Jill:
Exactly.

Steven:
Tomorrow, the episode on the Land Academy Show… Well, it’s Jack Thursday and I’m going to talk about fishing for land. You are not alone in your real estate ambitions.

Jill:
We got a lot to say. We talked a lot this morning and we still have a lot to say. What’s wrong with us?

Steven:
What is wrong with us?

Jill:
I don’t know. Thank you for tuning in, by the way. I’m going to cut it right out.

Steven:
It’s not like you’re disappointed. Thank you for tuning in.

Jill:
Hey, every other Thursday we are on Clubhouse. Join us. There’s going to be a new time coming. So, here’s all I want you to do. Just go find us in the land investing club and then also make sure you follow me, follow us and you will get notified when we are there and we go live and we’re on stage and chatting, because it’s good stuff. [crosstalk 00:17:00] We’re Steve and Jill…

Steven:
Information-

Jill:
And inspiration-

Steven:
To buy undervalued property. That’s going to cause some YouTube comments.

Jill:
Why?

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