This is episode number 2191.  Jill and I are talking about how to apply the laws of supply and demand to the land business. Here’s what happened. There’s a penthouse condo that came up for sale in Old Town Scottsdale. We were talking about it right before we turned the cameras on. Jill’s got stars in her eyes, and it’s reasonably priced.

It has one heck of a hefty HOA to which I said, “Will they come and load my dishwasher, too? If that is the case, you have my attention.” We’re talking about how to apply the laws of supply and demand to the land business. This came up in conversation. I got this new book about investing. People are like, “Jill, why would you be reading a book about investing?” Hold on, everybody.

I think that’s great.

Thank you.

I love that about you.

It’s written by a woman. She’s covering everything. It’s beginner and intermediate level on everything you can think of, including bonds, stocks, and all the different kinds of funds that are out there. I’m only at the beginning of the book. She’s making some generalizations about the real estate market, which we know very well, supply and demand. We had a conversation, so we decided, “Let’s talk about it here.”

Decoding Market Health: Analyzing Zip Code Data For Land Deals

Each day on the show, we answer a question from our Land Academy member Discord forum and take a deep dive into land-related topics by popular request.

Ram wrote, “If a ZIP code has a strong twelve-month history of sales, but no current listings, is that a good market to mail to?” I’d be like, “Hang up right now and go do it.” He says, “I would think so, but that seems to fail the Red, Yellow, Green test. Since the realtor data is pulling homes and not just land, I wonder how relevant the Red, Yellow, Green test is in such markets where demand for land is clearly outpacing supply. I’m brand new to this, so maybe I’m missing something here, or am I?”

These are very good questions. I’m glad you asked. We use countywide and ZIP code-wide real estate data from the multiple listing service period. Why? It’s because we can’t get good land data. If I could just get land data, then I would. If I could hire somebody to extrapolate it all, I would do that without a crazy mess, having it change every single month and having it not be cost-effective.

The real estate data that we’re all used to is usually for houses because that’s the majority of how people make money in this industry. There are commercial real estate exceptions, but we won’t get into that. We want to look at the health of the real estate environment within that jurisdiction, not just land. When you stumble on something like this, and the Red, Green, Yellow test says this is positive, you want to mail it.

There is money to be made when prices go down. Even in recessions, there's opportunity for record-breaking success. Share on X

When you have a lot of completed sales and you have no sales active listings for land, it’s for 1 of 2 reasons. The market’s amazing, which is probably the case, or it’s in a ZIP code that’s so urban that there’s no land. You find that in sections in ZIP codes of Los Angeles County where there is no land, and it passes the Red, Green, Yellow test.

You’ll find that out when you jump into the next step. You go do the mailer and type in the ZIP code in DataTree, and sixteen properties come up. Those are probably incorrectly put into the assessor’s database anyway. My guess is this is a very urban area. I love these kinds of questions. This tells me you’re using your head. As you’re going through this process, you’re utilizing some serious common sense. A lot of sales, no current listings. Is it good or bad? You’re going to do great at this. I don’t know what else to say.

That was perfect.

Supply & Demand Explained: The Core Economic Principles In Land

The topic is how to apply the laws of supply and demand to the land business. This is Jill’s idea for the topic. My first brush at this was, “Isn’t that obvious?” Was that your first brush? What does it say in your book?

It was a duh moment, and people forget that. That’s why I want to talk about this. There are many people going, “We’re feeling it. My land properties are taking longer. This time last year, they were flying. Two years ago, they were flying off the shelves. What do I do?” Hold on a moment. Think about what’s going on. When demand is down, so are prices. People are still talking about why this is important, too. Every week, we have people going, “Should I offer more?” I’m like, “Why would you?” Think about that.

Supply and demand is an Economics 101 concept. When you have a lot of something or when you have a large supply of something, it’s going to get cheaper because there’s so much of it. This happens with crops every year. The demand goes down. If you’re the only person in Central Iowa that’s got bushels of corn, or it used to be you’re the first to harvest the corn, then the price is going to be higher. When there’s so much of it later in the season, the harvest season, and if you’re in agriculture, you know that I’m oversimplifying this, the price goes down.

Theoretically, it is the same thing with gas. We’re like, “It’s $5 a gallon? Last week, it was $4.” Theoretically, it’s because supply and demand fluctuate. We all know there’s a lot of politics involved and other things involved, like cross-country politics. In general, that’s how it is. Every Christmas, there seems to be some toy that catches on. Everybody wants it, and everybody’s racing to the store to get it to buy for their kids. That’s a low supply, a high demand.

The price goes up because it’s the last one.

It applies to every single thing. If you and 2 girlfriends walk into the bar and there are 92 handsome guys in there, you’re in demand. Their supply is low.

To which you could have any drink you want, sit anywhere you want, and talk to anybody you want.

Recession Opportunities: How Economic Downturns Fuel Land Deals

It applies to every single thing. For real estate, it’s no different. Interest rates are high compared to what they have been in the last few years. We’ve got somewhat of a threat through a recession, where certain people are having issues with staying employed. There are a lot of things changing. AI’s changing things. We’ve got a new administration that’s making some big changes.

All that leads to uncertainty, as you can see in the stock market, which makes people more open-minded to selling their property. I’ll tell you what pushes somebody to sell their property overnight. People are like, “My mortgage used to be $3,000. Now, it’s 4,000, because I had an adjustable-rate mortgage and I didn’t know that I signed one. Now, my rate has gone up. I used to pay $3,000. Now, I’m paying $4,000. That doesn’t work for me financially. I have to sell a house or get a better mortgage, or make some decisions.”

The aggregate of all that is causing a ton of property to be put on the market. Land, houses, commercial, all of it. There’s more supply and less demand. There’s more supply, and there are more properties listed. That allows people like us and, hopefully, you to send out mail or go in on properties that are  listed for sale and say, “I’m going to tell you the price.” Jill’s famous for this. She’s like, “That’s great. I’m glad you want $500,000 for that, but $380,000 is what I’m ready to pay.”

It's time to buy really inexpensively and if the deal doesn't work for you, just go to the next deal. Share on X

This is the reality. I’m like, “I can hang up the phone and call the guy next door and the guy next door, and one of them is going to say yes.”

There’s a very high degree of likelihood that if you send out 10,000 mailers and you do what we say, spend a ton of time analyzing the data, price it correctly, and spend some time sending out a well thought-out actual mailer, you’re going to buy some property way, probably less than 20% of its actual current value. That’s supply and demand.

Jill and I always make money when prices are going down. I didn’t realize that until they went down again. This is my fifth recession. On the way up, we do okay. We do very well. On the way down, it’s record-breaking. What I’ve noticed with people like Grant Cardone is they’re cranking all their stuff up because there’s so much real estate opportunity. It’s silly.

The other thing that’s happening that’s very unique ever is that Baby Boomers are retiring and downsizing. They’re selling a house that their kids grew up in and have no mortgage on. They’re selling it, downsizing, and buying another one. There are a lot of strange but very good things that are creating the storm of hyper supply and low demand. In a low-demand scenario, you have a lot of opportunity to beat them on price.

That’s the point I’m trying to make. People are like, “Maybe I shouldn’t do this. This is a bad time,” to which I say, “It’s a great time. You need to pay attention and know what you’re doing.” I don’t know exactly when. You watch it more than I do. I watch you, and you watch everything. When it recovers, we’re going to all be saying, “I wish I had ten more of those properties.”

100 more. This is the time to buy inexpensively. If the deal doesn’t work for you,  go to the next deal. Join us in the next episode where we discuss the real reasons your land won’t sell quickly. You are not alone in your real estate ambition. We are Jack and Jill, information inspiration to buy undervalued property.