Episode #58: Strained affordability in today’s US housing market

[00:00:00] A lot of people say there's no way this housing market can crash, which I tend to agree with. There's just so many factors in place that almost, that make it very hard for it, but that's assuming nothing changes. Well, let me just start by saying, for someone to say it's not going to is not taking into account number one history because we've seen, you know, the pendulum go both ways. We've seen major international affairs that have direct impacts on-

[00:00:27] Yeah, so to say that it won't happen or it can't happen, let's just get rid of that one. Just in the last like almost 25 years alone, you know, unfortunately you had 9-11, then you had 2008, the Great Recession, and then you had the pandemic. So there's been three major economy changing events just in the last 25 years.

[00:00:54] Welcome to the podcast dedicated to real estate, insurance, and building your business. Join us as we take you along our own business building journeys with additional wisdom from our network of local and national experts. Welcome to Bricks and Risk. Hey everyone, welcome to another episode of Bricks and Risk. I'm Timmy Garrity. And I'm Sean Mooney.

[00:01:25] What's going on, man? Hey, what's happening? Ready to get into some glass half empty Mooney business today? Yeah, we're shooting this on December 19th. It's Buck's birthday today. We're in the holiday season 2024. The topic for this one, folks, came from our dear friend Sean over here, who posts random stuff in a folder titled Nothing. That's not actually accurate. What is the name of the title?

[00:01:55] Nothing divided by nothing equals nothing. That's really what it is, so sorry about that. We'll share it out. We'll share the links out. Yeah. But what's going to be cool about this topic today is we're really going to talk about housing. We're going to talk about housing and affordability and why it's strained right now, particularly in 2024. And, you know, there's different people out there that are saying, hey, 2025 is going to be a great year. A lot of people in my industry are like 2025 is going to be much better.

[00:02:24] Interest rates are coming down. There's going to be more inventory. It's like no one knows. It sounds like me, glass half full. It does. So let's talk about why the housing market is strained right now. We're, again, December 2024. So I'm going to put a statistic out there. Again, I'm not a statistics guy. Sean's a little bit more analytical with better with numbers than I am. Just like he's a better man. Better dresser. And a better reader. And a better dresser.

[00:02:53] Better eBay buyer. Better OBO shopper. All right. So here's the statistic that I read. This came from Resi Club. Very great resource. So it said the average buyer's income would have had to rise 86% since January 2020 just to keep pace with the current median priced home. Which, I mean, think about that. That's crazy.

[00:03:22] Like, give me your initial thoughts on that statistic. So I see it. I see firsthand what these price escalations have been over the last couple years. Yeah. They're eye-popping. I mean, you know, the values on these homes, you know, when you look up a home online comes, you know, as a listing.

[00:03:48] And you just see that trend line of where it was price-wise. How fast it's risen. I mean, it's like off the page. Yeah. And if you scale back prior to that, it's, you know, moderate type of increases. Yep. And then it hits this weird rocket ship. Yeah. That just takes it off.

[00:04:10] So it makes sense when you're seeing it because you're, you know, it's over, what's that, four years, almost five years? Yeah. Of increase and more increases and more increases, like kind of like the compounding of it all. Right. So it doesn't surprise me it's at that number. And I don't know if that takes into account if that's just the price or if that's also everything involved with owning a home too. Yep.

[00:04:40] Because utilities are up, you know, insurance is up. Everything's up. So, you know, all of those additional factors that kind of weigh in. I guess interest rates too. I mean, that's a big piece of it. I'd say, let me, I jotted down three things myself that I thought would kind of like set the stage for a good discussion. I was wondering why it's strained and why housing affordability is an issue in 2024.

[00:05:07] So first reason I gave is price appreciation. So price appreciation has happened for a few different reasons. Probably the main reason is that there's more demand than there is supply. And it's been like that for years, even pre pandemic, it was technically a seller's market. But since the pandemic hit in 2020, supply has been a real issue for most major metro areas.

[00:05:35] And it really wasn't until this year that supply started getting a little bit healthier, meaning more homes are coming on the market for sale. Therefore, if you're going to go out and buy a home with your buyer agent, you have multiple options to look at. You don't have a gun to your head. It's not like someone saying like, you got to look at this tonight. We got to have the offer in tomorrow. And if we don't, someone else is going to buy this thing. So price appreciation mainly has come down to supply and demand issues.

[00:06:05] Why is that? Because if you roll back the tape, you know, let's call it like 15 years ago. Like, like why would supply be an issue now? Like I would think that like baby boomers are retiring, getting rid of their home. So I would think just from that kind of part of the equation as they're moving out and going different way that. In big numbers, the supply wouldn't be an issue. Yeah.

[00:06:34] So, well, we just released Rob Shuck's episode on bricks and risks. What's up, Rob? Shout out. And Rob brought up a really good point. Mostly it's, it's, it's really more of a demand issue, meaning millennials got kind of whacked back a little bit by 2008. And when they did, they went, they, you know, maybe got a master's degree, you know, they went, moved home for a little bit or just found cheap rent. Like whatever it was, they delayed housing, the housing purchase.

[00:07:02] But now the millennials are at that age where a lot of them are either getting married, are married, are thinking about kids, have kids. Like they're moving up in life. So it's skipped and, and the need for that first time purchase is different because if you do come into the market with children, you're skipping that first initial, like you or your condo, like you got in the market, you owned, you owned the condo because it fit your specific need. Right.

[00:07:30] But now if those people are delayed and coming into the market with kids or expecting kids and that equation is different. Right. Then, then that does create a bottleneck. Yeah. It's really, it's like timing. It's like timing of generations is the best way I can put it. So you got millennials that got backed up a little bit by 2008 and then you have Gen Z coming up right behind them. They also want to buy, like they know where they're at.

[00:07:57] You know, they were like, probably like, I think Rob said in high school when, or I'm sorry, like in grade school possibly when 2008 happened. And then they went, they got the degree. They're very focused on what they want to do and they, and they want to be part of the American dream. The number one wealth builder in the United States is real estate is buying real estate. So. I think another impact, a little point on that might be when they change the healthcare too. Right.

[00:08:24] Because remember when they changed it to extend out how long children can be on their parents policy. Oh yeah, I do remember that. Yeah. So, so it allowed parents to like leave their kids at home. Like it didn't force children out of the house. Hey, go get a job and you need to go get, you know, uh, your own health insurance and,

[00:08:46] and kind of like a push to, to get them out and get them on their, I think that could have been another factor in delaying. Definitely. Um, why they, you know, millennials are so late into the game. Yeah. There's just so many people who want to buy right now. And a lot of these people are either like first time home buyers or move up buyers. Another part of the reason why the supply demand is, is skewed.

[00:09:11] Let's call it is that, you know, the baby boomer generation, they're waiting longer to sell. Like they're aging in place. They want to stay in their homes. You know, it's like, we're dealing with this. You know, we have friends that are dealing with this. We have clients that deal with this. Where the parents almost don't want to leave unless, unless they're forced to, unless, you know, I can't go up the stairs anymore. It's like, you know, I don't, I don't want to take care of this lawn anymore. I don't want to fix the roof. I don't want to replace my HVAC.

[00:09:40] And because they're staying a little bit longer than, than the churning of properties that would hit the market for these buyers is just not hitting the market. And therefore there's not enough places to buy. So the second one I have is interest rate increases, which a lot of people have said, that's like the number one reason it's debatable. But I will say during the pandemic, interest rates were 50% of where they are right now. They were like three and a half, 4%.

[00:10:09] Right now we're basically right around seven. I don't think interest rates would be a problem if housing prices. Correct. Like I'm okay with a 6% interest rate. Historically it's good. I'm fine with that. It's like amazing actually historically. I don't want to pay 150 more than where this house was a couple of years ago. Right. Plus the additional interest on top. Yeah. I think that's just the convergence of those factors. Yeah.

[00:10:38] And it's like, I say this to people all the time. It depends like how long you're going to plan on staying in the house. Like most people I say, you should plan to at least own the piece of real estate for about 10 years, seven to seven to 10. And I'll say maybe if it's like a younger buyer or first time home buyer, because again, they want some flexibility. Like this isn't my forever home. This is me getting into the game. And if I buy this house, you know, maybe in five years, 10 years, 15 years, I'll trade up. I'll either sell it and trade up or I'll rent this and I'll trade up. I'll pull equity through a line of credit or something like that.

[00:11:08] And I think if you're going to stay in your home for a long period of time, to be quite honest, you really can't overpay for a home. Because if you're planning on like raising children or a child, or you're like, hey, I'm going to like retire here. And then my next home will be my retirement home or my downsize home. Like if you've got a 20, 30 year mindset, like you're going to pay off your mortgage, especially if you got in with a good interest rate. What percentage of buyers that you deal with, would you say fall into that category?

[00:11:37] Of wanting to stay long-term? Just their approach as to, okay, I'll be here 10 years. I'm good with that. Yeah. A lot of my buyers do fall into that category because most of my main buyers fall into like that 25 to 45 age bracket. Yeah. And therefore they're more inclined if let's say they're in the middle, they're in like they're, you know, they're 35 or something like that. If they're 35, they may already have some life plans in place. Maybe they're married. They have a significant other. They have a child.

[00:12:06] They're thinking about that. Like they're ready to like put roots down. Yeah. And when they're ready to put roots down, what's the first thing we all think about? We think of school. Like where's my kid or kids? Where are they going to go to school? Is it going to be public? Is it going to be private? Is it going to be local? I'm going to drive. Like what am I going to do? But when you think school, even look, I only have one child. I have a daughter and it takes, it takes basically like 13 years or so to get through

[00:12:34] the education system of like kindergarten through high school. And then if you have preschool, that's part of it as well. So you kind of have like a 15, 17 year plan. But you don't have people that buy into a market and like there, there's not a big number of your clients that you see that buy into a market and like three or four years go by, they take a new job and they're out of town. You don't see.

[00:12:59] I don't, I don't, in today's market with prices where they are, if someone said I may leave in three to five years, I'm usually like, I don't know. I don't know if I would consider buying unless you want to be a landlord when you leave. Yeah. And then for the right person or people, they're going to say, yeah, no, I want to hold on to this asset and have someone else pay my rent and have it keep appreciating because I believe in Philadelphia. Like this is very common in the city. If someone comes to the city for like a job or for school or something like that, they

[00:13:29] might be here three or five years. Yeah. And it's easy to rent on the back end. Yeah. And if they buy in a good area, it's like we're analyzing rentals up front. It's like, hey, in today's market, you would get 1800, let's say, or you get 2500 or whatever it is. And then you can kind of get a sense, oh, if I could rent it for that, like I'll just deal with Tim. Could you put it on the market and lease it for me? Like, of course I can. Like most of the rentals I do are just for past clients and current clients. So let's get to the third reason.

[00:13:55] This comes up by you a lot, especially like in insurance, is inflation. So that is, again, we got prices have gone up very quickly in a short period of time. Interest rates have almost doubled in that same period of time. But inflation, since the pandemic, has just been astronomical. It's a stranglehold. Like I know it's getting better. Remember we did our top three about podcasts? So I talked about the Reconomy podcast.

[00:14:26] Fantastic show if you've never watched it. Yeah. And they were talking about inflation recently. And one of the big, I think it's one of the big parts, don't quote me, of core inflation is housing, mostly rentals. And the rental factor, the rental number usually goes back about a year. So they're kind of taking like a whole year and that's their number. It's not like what happened last month. Yeah.

[00:14:53] So because of that, it's still a little high because in the last year, actually the cost of renting a home has come down nationally. Well, it's come down off of the highest of high peaks. Right. So you're still at a higher number than normal or average. Absolutely. But just compared to year over year. Yeah. It's come down.

[00:15:19] So it's like they're saying that number has already come down and they're thinking in like maybe Q1 of 2025, call it spring of 2025, that that number is going to come down a good amount, which is really going to make the inflation number that much lower. But it doesn't mean that inflation hasn't played a role in everything to date. Yeah. Because again, it's like the cost of everything, the cost of utilities, the cost of groceries,

[00:15:47] the cost of clothing, furniture, like you want to get your house painted. Maybe there's not enough contractors like that all plays into it. Yeah. And those are kind of some of the main reasons. Well, I don't know how they judge inflation. I've read some, some different things about CPI consumer price index. Yeah. Yeah. And I think, I think they monkey with these numbers a lot. Of course. Like it's not clear as to the actual defined measurement of CPI.

[00:16:17] A lot of it's timing. I mean, politics unfortunately plays into these economies. But if you wanted a true number, it would be a true set of these 20 things and these 20 measurements. And where were they last year? And we're like the ability for them to manipulate. Oh, well, we're not going to include this in our CPI. Well, wait a minute. Why are you pulling that out? Excluding that. Yeah. So when, I think when people talk about it and they say inflation's cooling off, look

[00:16:46] at consumer price index numbers. I don't know if that's a true gauge on what the actual person is feeling in this market. Yep. Right. Cause you're, I always felt like when that was announced or when they have these different announcements after a quarter, after a year, it's, oh, look, it's, it's, it's trending down and you're like, okay.

[00:17:09] But like when I go to the grocery store, I'm not, it doesn't feel like I'm paying less. Yeah. And I think with the housing market too, is I guess it's different geographically across the nation. Right. So, you know, every metro area is going to be different. Um, and the Philly market right now. Expensive. Yeah. Yeah. And I, but I don't see, and I don't know what your take is, but I don't see it coming

[00:17:39] off of where it is right now. Where it is. Yeah. Well, we live in such like a, a stable community. Yeah. Like people in the Philadelphia area, whether you're in the city, you know, Southeastern PA, Southern New Jersey, you know, this is all part of like the greater Philadelphia metro area. Even parts of like Delaware and Maryland technically. Yeah. You know, this is a generational area. Like people stay here their whole lives, you know, grandparents might've been from here, parents, now you're here, now you're maybe raising kids here.

[00:18:07] So this isn't a super transient market. And I don't even know how stuff like that plays into like gas or groceries or things like that, knowing that people aren't going to go anywhere. Oh yeah. So, so that's interesting as well. Like maybe the more consistent markets have, have higher inflation on everyday goods because they know no one's going to leave. Yeah. Whereas someone in more of a transient area, maybe somewhere out West or in like the South or the Southwest, like they come and go.

[00:18:36] I've heard like a ton of people have moved to Florida. Now I hear a lot of people are moving back out of Florida. Not to say Florida isn't doing well, but people come and go in Florida and California and Texas and Arizona, like people come and go. These are markets where people move in and out. Yeah. Um, all right. So one of the main things that you shared in the nothing doc, uh, that sparked this was

[00:19:01] Amazon is currently selling $30,000 houses. And I'll get a picture for Dil so he can, he can throw it up for us on this episode. So I'm on the computer. I'm looking, looking, looking, looking at this. I got a, how do I get a monthly payment around like $200 a month? I could have bought that lot in Maple Glen on top of the river. You're like, Katie, I got some news. I just ordered us a house. I found the land. Bye bye too. I'm still ahead of the, you know, stack them on top of each other. Hey kids, kids, come here.

[00:19:29] I got some news, but it was like an article that, you know, hit my feed and it was, you know, buy a house from Amazon. So of course I had to click on it and see what it's all about. And you know, for the $30,000 price tag, uh, kind of caught my eye. Well, for the generations I was just talking about, let's call millennials and Gen Z, some of the younger buyers in the market, you may or may not be familiar with this.

[00:19:56] We're only familiar because maybe we had grandparents that had houses like this, let's call it. But Sears, yeah, not really much of a company today. I mean, is Sears still around? Yeah. They're still alive? They were at the Willow Grove Mall for years. Um, I think it's all, I think they, they disbanded all of the retail physical locations. I think maybe they still exist some other way. Yeah.

[00:20:21] Um, so Sears was the first company to have what was called mail order homes. And that started in 1908. They sold 70,000 mail order homes from 1908 to 1942. And like some of the, you look at some of these old, some of these old ads cause they're like newspaper ads or whatever. And it's like, you know, these houses were like 1500, 2500 bucks.

[00:20:47] And they're like big craftsmen, arts and crafts, bungalow style. D'Amico. Colonial style. D'Amico has a Sears house. Yeah. I think is his, uh. I think it is. It might be. And you know what? My old house on Lyceum, a lot of people said was what was called an American Foursquare. Now there, now American Foursquare existed before you could buy them in the mail. And my house, I found when I went to city hall and my wife and I took a day one year

[00:21:16] and we went down with like dug through the records and we, from what we could read, cause it's all old school. Our house was built in like the 1890s. Our old house. The one, the one in Roxborough. Um, so you're saying your house, some people said your house was like a kit. Well, yeah. A lot of people used to walk by my house and say that's what an American Foursquare looks like, and again, they didn't just start making these houses in 1908 with no, no understanding of what the house would look like. They may have modeled their mail order houses after that because I think American Foursquares

[00:21:45] go back into the 1800s too. Um, but what's interesting about this, I feel like, think about that time. So again, it's like 1908, you get to the roaring twenties, if you know anything about history and like the economy was booming. Yeah. Then you get to the great depression, you know, right before you got to 1930. So then it went until 42. So it probably, it probably was like, let's sell these so people can build homes on land. Affordability. Yeah.

[00:22:15] Like there was land everywhere at the time, you know, suburbs didn't really exist in most markets. Yeah. Let people build homes. And then after the great depression, they probably took off like a rocket ship as well because it was an affordable way to own a property. Hey everyone. This is Tim, your favorite bricks and risk co-host, but don't tell Sean. I hope you're enjoying this episode and I'll get right back to it in a moment. Our audience grows through word of mouth.

[00:22:41] So if you would please take a moment of your time and give us a review on the platform you're on, that would be fantastic. Please also help spread the BNR word by sharing your favorite episode with a friend. We greatly appreciate your time and trust. Now back to the show. So these $30,000 houses, some people might think like, who would, who would live in a

[00:23:08] house like, like I came and look at a house for like less than 300,000 in most areas in and around Philadelphia, depending, depending on what you want. And what? I'm going to get a house for 10% of that. I mean, a few things to consider. One, you would need, you would need land first and foremost. You're going to buy one of these things. You can't just like throw it in the street. So there will be a public park or something. You could get in trouble.

[00:23:38] Throw it down to FDR. Yeah. You could get arrested. Possible. You would need the land. So yeah, you would need to, and any land right now isn't cheap, right? And availability isn't. Well, let's think about this. This is, so I'm going to give a little real estate tidbit here. There's a subject that's come up in real estate nationally the last few years. It's called ADUs or accessory dwelling units.

[00:24:03] So what an ADU is, think about when they started making these little like sheds with glass that you could put in your backyard. And they're like, this is like your, your man cave or like your. She shed. She shed. Yeah. That was, that was the other one. And then you could like, you could work out there. You could exercise out there. You could put a sauna. It's like all this stuff. You're like, what? Like, so people started thinking about that.

[00:24:30] And then there was the tiny house movement that's still kind of going on right now where people buy these tiny homes and they'll just find a place where they can either rent land or maybe in someone's backyard that allows for an ADU, that allows for an accessory dwelling unit. And some of the zoning, check your zoning, allows for you to put one of these in your backyard.

[00:24:52] So here's an example with all the people that are the baby boomer generation getting older and not wanting to leave their home. Hey, if you're one of their kids and you're the real estate that you own allows for an ADU, you could put one of these things in your backyard and have your folks age there. In-law suite. Yeah. They'd be with the grandkids. You know, you got breakfast together. Now, again, I don't, I don't want to assume anyone wants to be that close to their parents or their in-laws at this stage in life.

[00:25:22] But to each their own. Well, sometimes you need to take care of them. I mean, sometimes it's, you know, when you look at the equation to say, okay, they can go in this home over here. Yeah. Or they sell their house, get some cash, put it into an in-law suite in the backyard. Yep. You know, I think that's a, that's a viable option. Yeah. I mean, so the reason I wanted to start with ADUs, I actually think the reason Amazon is doing this is because they're looking for people who have,

[00:25:52] ADU zoning. And they're like, they're going to want one of these in their backyard. Here's another example. Let's say you want a rental property and your zoning allows for an ADU and you don't care that people are living in your backyard. You could buy one of these things for 30 grand, maybe charge them a thousand a month. And that's going to be paid off in less than three years. We should build our own model and take the cockpit. And then we could model. The famous Glenside cockpit.

[00:26:21] Glenside cockpit. And then we just model that. That look? I would have to pay. You got to slide the cans down the wall still. I have to pay a trademark fee to Patsy for every cockpit model that we issued. You got to put a funnel in there with a PVC pipe too. It comes with it. It's like you want a cockpit version of the house. Well, I think about it. There's a lot of houses that come to mind that actually this model exists. Yes.

[00:26:48] I have one of my very dearest friends, Mimi Pack. Her daughter has a place over in East Narden, over that way. Plymouth meeting area. And that's what they did. She was in a place, she was living, and they built like a home in the rear. Yeah, like a guest house people called or like, you know, I mean, yeah, it's really most

[00:27:17] people call it like a guest house or like an ADU, like an in-law suite. Yeah. You know? And the Buxar house, you know the Buxars in Glenside? I know the name. Yeah, yeah. So they lived right at the corner of, what was it? Abington. Yeah, Ryan was right around my ear, I think. Yeah. Yeah. But they had the house in the corner, but they had this like garage with living area above it. Okay. And I think at some point they subdivided it. They're like, oh, we don't need that. We'll just sell that. Yeah. I mean, it's like, think of some of the ideas.

[00:27:45] Like if you have a big backyard, it could be something for like elderly people in your life that could live there. Yeah. Because maybe it's one story or an easy two story lifestyle. It could be a rental property. You buy a house for $30,000, you already have the land. I mean, who's paying $1,000 rent in today's world if you live in a major metro area? You're paying way more than that. So you think about how long it would take to pay that off. And then the third would be like almost like Airbnb.

[00:28:14] Now again, a lot of this comes down to zoning and obviously the laws of your area being allowed to do that, but if you could and you could buy one of these things, I mean, you could create an amazing experience for someone either as a tenant or someone that's just looking to travel and they want to come to Philadelphia and they're like, hey, I'll stay in your Airbnb. I think it's from a timing standpoint, I think it's good in that millennials and Gen Z people,

[00:28:43] number one, if they can't get into a market, this gives them like a bridge. Yeah. To owning a home. Yep. I think they'd be more inclined. I think there are more transient people in general. Yeah. Like they're, I feel like if you talk to someone. Like digital nomads? They're like traveling all the time and all of that. So I think that they don't necessarily need all of the extra space.

[00:29:11] So I think this would be suitable for a lot of them and work for them. So by way of the price tag and getting them into the market, I think it would be a good fit for them. There's definitely been a movement in, I mean, it's probably around the world, but specifically I see a lot in this country of people living like they don't want to be tied down by anything.

[00:29:35] They don't want to like buy a house in a town, in a city and own it and be tied down by it. Like it's a small percentage of people, most of the time because they love to travel and they want to keep their costs of living down. So these are the people that have bought RVs, that have bought vans, that have bought tiny homes and you can move these things. Yeah. You can move these things to different areas of the country.

[00:30:04] Technically you can go to Canada and Mexico too, if you want to, if you live in the U S and, and you can work from anywhere, like maybe you're a travel nurse, maybe you're, maybe you do graphic design, maybe you're teaching YouTube classes, like whatever it is that you're doing. So many people can work out of their homes these days. Only fans. Only fans. I mean, you could, you know, have a van. Please don't Google that one folks. If you don't know what the hell that is. Um, like foot models or something.

[00:30:34] Um, so this movement of people, like they're bringing down the cost of living. Like how to, first of all, how do I live my life? Do I stay in one spot or do I move around? I feel like this is an option for someone that says, I want like a base somewhere and then maybe I'll still travel a little bit for work or whatever. Like maybe I got a van and they got one of these. And the two of them combined are still much, much cheaper than trying to buy a $300,000

[00:31:03] house or a $500,000 house. And they don't feel like they're trapped. So I think there's a reason these homes are being made again. Not only that, but I think there's a reason that they're selling out because there's all these people that have been trying to spend thousands of dollars out of their monthly budget a month just to become a homeowner and they can't. I wonder if that pushes out, uh, the barriers, uh, into new, like you have your five County Philly Metro. Yeah.

[00:31:33] I'm curious to see if this takes a hold and starts to put, cause you can buy land further out. Oh, of course. Way cheaper. Yeah. Like lots of Pennsylvania is like super affordable. Yeah. So I wonder if this, like if it takes hold and you start to see these pop up number one, outside of these major Metro areas, but number two, I could see towns outside incentivizing people. Yeah. To, to do that. Get one of these things.

[00:32:01] Here's, we bought maybe the township or the County buys the local municipality. 10 acres or something. Pries a bunch of land. Yeah. They're like, look, there's 200 lots. Yeah. We'll sell you a lot for 15 grand. Get yourself an Amazon house and move here and then start a community. B Y O A H. Right. What does that stand for? Bring your own Amazon house. B Y O. And think about that. I was like, what? O B L. B Y O. Um, all right.

[00:32:29] So let's get to the last part of this one before we wrap it up. Will the house, is there an end to this in sight for the housing market? Like a lot of people say, there's no way this housing market can crash, which I tend to agree with. There's just so many factors in place that almost, that make it very hard for it, but that's assuming nothing changes. That's assuming the job market doesn't change. It's assuming there's not some kind of global event.

[00:32:58] I mean, who could have predicted the pandemic and that boom, it hit month later. Whoa. The whole world changed. Yeah. So if there were to be a crash, if it were to happen, like what kind of things do you think cause that? Moonstradamus. Yes, please. Um, so what, what's your question?

[00:33:24] What events would cause a cataclysmic reshaping of our lives? Our economic and housing market? Well, maybe I asked this incorrectly cause I feel like where you might go with this might be a little, yeah, you don't want to go there. A little strange. Yeah. Like Pandora's box. I'll, I'll address some points and then you can nod or you can do that. So one link like, what I have is the job market. Like let's say the job market tanks for whatever reason stock markets have crashed

[00:33:52] and job markets have tanked. You look at history, it's happened. Well, let me just start by saying for someone to say it's not going to is not taking into account number one history because we've seen, you know, the pendulum go both ways. We've seen major international affairs that have direct impacts on- Blown everything off. Yeah. So to say that it won't happen or it can't happen, let's just get rid of that one. Yep. So it, so it absolutely can. Yep.

[00:34:19] So if the, if the housing market does, uh, if the job market does change, if the stock market does change, obviously that could have a very impactful, um, change as to where this thing could go. Yeah. Like here's a great example. Like let's say for whatever reason, some corporations are tapped out and they go out of business. Yep. What happens when they go out of business or when they want to shrink down, they lay people off. Yep. If lots of places did that at once, again, this is what happened in 2008.

[00:34:47] Like the great recession, unemployment was insane. Yeah. And that was what was making housing so, so unaffordable to live in back then. Cause again, you had the buildup of like, Oh, four, Oh five, Oh six. And then everything kind of started chilling out. I mean, everyone was losing their jobs. Yeah. Everyone was losing their jobs. It was very common at that time to get laid off, get laid off. Not, not even that. But I remember if you, if you remember that time, like trying to look for a job. Yeah. It was like impossible. It didn't exist.

[00:35:17] Yeah. You know, there was no company that was, Oh, we're, we're bringing on a, you know, come here. We're growing. Like no one was growing. Yeah. So think about that just in the last, like almost 25 years alone, you know, unfortunately you had nine 11. Yeah. Then you had 2008, the great recession. Yeah. And then you had the pandemic. Yeah. So there's been three major world events, economy changing events just in the last 25 years. Yeah. Yeah. Now I know the pandemic was recent, but still. Yeah.

[00:35:46] Yeah. Jobs are at an all time high right now. Unemployment's at an all time low, you know, but, but so is the cost of living. Yeah. Yeah. Yeah. So that's potentially one. I think that one probably has more teeth than most. The other one I put was like a war or a world event. So that would be if, if something ensues like a geopolitical issue, you know, overseas or here, God forbid that there was like a war. Or sometimes wars tend to throw things off in the stock market, in the economy. Yeah. People just pull back. They're like, oh no, no, no.

[00:36:16] Like get out of that. Like sell, sell, sell. And then the third, which is also, I think likely is a severe recession. Like, I don't know if that would have the same impact as 2008 because that was pretty severe, but there could be something in between that. That, let's say like a normal recession. Yeah. Maybe it's a little bit more. Like we went through a recession when the pandemic happened. A lot of people don't remember that, but yeah, we did. Like no one was working.

[00:36:45] Like real estate was turned off for two months. The way that it happens when business stops, you go into a recession. Yeah. Like if no one's making money, then the economy is going to start tanking. Yeah. And that's what happened. If the, if the crypto market, you know, overnight were to be half, it really set, set some people off, set you off. Yeah. Not me. Raise some flags. A reason for concern. True.

[00:37:15] So, but there's definitely recession, slow down the economy. All of these different factors are any available option for the housing market to take a change in direction. And again, these are just possibilities. Obviously no one has a crystal ball, you know, I don't think it's going to happen one way or the other. I'm sort of neutral right now. I don't think it's going to keep going like it is just because I don't see that as being sustainable. And I also don't think it's probably going to be like some major catastrophe, like something

[00:37:44] that would really tank the economy. So is the most likely or most reasonable prediction moderate increases or decreases? I actually think in the next year or two, I think home prices will probably either completely stabilize, like not appreciate or possibly come down a little bit on like a national scale. And I think it'll probably be more in like a tightening of the economy and more or less

[00:38:09] like the jobs market because it's just like the stock market is insane right now and it can't keep going. Like everyone's like, oh no, no, like there's an election like, you know, and historically like after elections are like, it doesn't even matter who you voted for or who you like. There's again, I brought up in an episode that hasn't released yet. There's there's a something called price elasticity. You can only afford what you can afford if you don't have any more money. You can't buy it.

[00:38:35] Like, and eventually this will also happen for big business, for corporations. We can't we can't keep all these people on. We're not making enough money or like we made some bad commercial bets and the pandemic changed everything. And like we can't that loan's going to default. So now we got to do this. Do you think that the commercial real estate market, because that's kind of what you say in a decline? Let's call it the commercial office market. Yeah.

[00:39:03] You know, retail is actually doing pretty well and industrial is doing pretty well. So let's just call it the office. Yeah. Yeah. Do you don't think there's enough juice within that framework that could like if that really took a nosedive? Yeah. That it would set off. It would have enough juice. It would. Yeah. The reason like if the office market just like completely tanked, like let's say people can't, they can't keep kicking the can down the road. They can't renegotiate their mortgage terms or whatever it is.

[00:39:32] And all these people just default on their commercial debt. That's going to set off banking because again, a lot of these banks, you know, have commercial financing. And if no one's going to pay them their commercial financing, then they're going to be out a lot of money. If they're out a lot of money, then maybe some of them are going out of business. Yes. And that really, if credit is affected, which the office commercial market could upend, it has enough.

[00:39:59] There's enough of it out there that people could just say, we're not lending. Like we're slowing down. I don't want to do residential mortgages anymore. I don't want to do commercial financing. I don't want to do personal loans, lines of credit, small business. I don't want to do any of that. If people don't have access to credit, they go out of business. Here's where I think the stability comes in. And I actually think it's kind of a fraudulent way of doing it. But remember Signature Bank? Yeah.

[00:40:25] Remember these banks that, like they should have gone out and under, but they were like thrown like a rescue line. Yeah. And so I think that there's some power. I think they got scooped up, didn't they? They did. Yeah, it was M&A. But I think that some of these banks that are scooping up these banks are kind of forced into doing it. Well, just think about insurance. Who'd you just talk about recently? A big insurance company that's going out of business and you're like, they tried to sell the business and no one bought it.

[00:40:52] There was two that we dealt with in the last year, which never happens. Which means those people probably lost their jobs. Yeah. If they go out of business, they're not working. They got to go find another place to work. Well, they get acquired and they'll probably shed half of their staff. Yeah. Yeah. So M&As are actually a big reason why the job market could thin out as well, because usually with mergers and acquisitions, they look to labor first. Oh, we got double the amount of managers. We got double the amount of data entry, whatever. Yeah.

[00:41:21] And then they start to thin out the herd. Yeah. I mean, that's certainly something that could be a force that kind of pushes the economy in a different direction. Definitely. All right, man. You want to close this out? Well, so everybody that wants to reach out to the show, if you're a listener, first timer, you can email us at bricksandriskatgmail.com. You can leave a review. Best place to go is Apple or Spotify. And look us up online on the socials.

[00:41:51] LinkedIn, Facebook, Instagram. Get a hold. Drop a DM. We love DMs. And emails. And we'll read them. We will. So if you get on there and you leave a review, we've done it before. Make it funny. Hopefully about Sean. Always. And we'll read it and we'll get you on the show. Awesome. Well, that's all for this one. Thank you for tuning in again to another episode of Bricks and Risk. See you soon. Happy birthday, child. Happy birthday, child.

[00:42:20] Thank you for joining us on another episode of Bricks and Risk. Our goal is that you walk away with one or two valuable nuggets. And we greatly appreciate you sharing your time with us today. You can find all BNR episodes on Spotify, Apple Music, YouTube, and anywhere else you get your podcast content. Until next time, keep learning and keep growing.