A. Sell houses to people who HAVE jobs. For every piece of real estate, there is always going to be a buyer. People looking to buy a house will buy.
Q. Will house prices shoot up with massive inflation?
A. Probably not. There can be inflation in some areas (e.g. consumer products) and deflation in others (e.g. real estate). House prices will not shoot up because people have less money to buy houses. Real estate will not appreciate dramatically as the dollar loses value.
Q. Are rental prices going up or down?
A. It depends on the area because nowadays, there’s not one real estate market across the U.S. What’s happening in one market may be different in another.
Q. What is going to happen with interest rates?
A. Because of the national debt and the Feds printing money, interest rates will stay low.
If you want more deep-dive answers to your other questions, join me at Agent Mastery Live Virtual 2020 on Sept. 8-10th. We’ll be training you on BRAND NEW skills, systems, and strategies to help you win as we enter a new world of real estate. Check out the details here: www.agentmasterylive.com
Hi there, it’s Kevin Ward, the founder of YesMasters Real Estate Success Training, helping you get more YES and more successes in your business and in your life.
I rarely do this, but today I am going to do a video where I’m specifically going to answer a lot of the questions, comments I’ve gotten on some of my previous recent videos. Especially a video that we just did last week called The Housing Market Forecast 2020: Factors and Does it Matter? Having a lot of comments on that, but a lot of comments were in previous videos, that I’m just going to kind of address a few of those and answer some of the great questions that you guys have been giving.
So if this video is helpful and you’d like to get feedback directly from me and answered your questions, post questions that you have about real estate, about the markets, about the economy down in the comments below, so that I can help make decisions about what future content I’m going to be creating. And if you’re liking these videos, make sure that you give them thumbs up and also subscribe to the channel.
I’m calling this video, something about real estate, Scrotox, gold, silver, and all that kind of stuff, because I’m getting questions about this.
So here’s just as an example … actually, this was a comment, Ronald, in a previous video, “It’s wise to start considering buying precious metals, hedge against inevitable inflation.” And I’ve had a couple of other subscribers also ask, “Well, why are you not talking about gold? Why you’re not talking about silver? Why are you not talking about precious metals?” And the reason primarily is because I train real estate agents and my specialty is residential real estate. And so first, I stay in my lane, so that’s the first thing.
Now I am going to answer the question because this question has come up over and over, people talking about,
Where’s the best place to invest your money now?
“Well, if I’m not investing in real estate, if right now is not a good time to buy real estate, what should I be buying? Should I be investing in the stock market? Should I be investing in gold and silver? What should I be investing in?” And so if you’ve been watching the stock market, if you’ve been watching gold and silver, gold prices are nearing record highs. They’ve been bumping up at $1,900 an ounce for the last few days, silver has been on a tear and is expected to go up a whole lot more, the gold silver ratio. There’s a whole lot of things going on that are making gold and silver look like a good place to put money if you’re looking for a hedge against inflation. Or if you are looking for a safe haven in the event the US dollar collapsed.
Now these are complex conversations, deep dive conversations. Yes, I study this stuff because it matters to me and because of what my wife and I and what we’re putting our money and the things we’re investing in. Because right now real estate is extremely expensive and we’ve been in a bubble and so right now, just buying real estate, investing in real estate to buy and hold. You’re going to be paying a premium for most real estate and so that’s not where we’ve been looking at putting money. And so I’ve been studying the markets. I’ve been staying in the side market, I study precious metals and all of that.
I believe that gold and silver is a good place to put your money, right now silver is by far the better buy than gold, just because of the historical gold silver ratio. Silver is probably way undervalued compared to gold. So why have I not mentioned it? Because it’s not my lane and I’m totally cool with having the conversation about it, but I’m not going to become your advisor on all things gold and silver.
I will tell you that who I follow, I follow Mike Maloney who wrote the book with Robert Kiyosaki or he is Robert Kiyosaki’s precious metals mentor. Michael Maloney, he wrote the book, the Investor’s Guide to Investing in Gold and Silver back in 2006 or seven. And he actually called the economic collapse, that global financial crisis, he actually called it before it happened.
Another guy that I follow is Peter Schiff and I follow Peter Schiff because he called the economic collapse as well in a 2006 speech to the Mortgage Bankers Association. And he nailed and said, this is exactly what’s going to happen, he’s very sharp. Now I’ll tell you both of them, they own gold and silver companies and so they have an agenda. But they both have a very strong track record if you want to understand more about precious metals.
If people don’t have jobs, who do we sell houses to?
All right, from Xiomara, if I’m saying your name, so who are they going to sell houses to if people are not having a job? So I was talking about that with the economy, the direction it’s going and home prices … that when inventory floods on the market. And you can watch the previous video on the housing market forecast 2020 <https://yesmasters.com/housing-market-forecast-2020-factors-does-it-matter/>, I’ll put the link down in the description below so you can find out the context of this question. But basically if people are … we had a lot of people that a lot of houses are going to be coming on the market, who are they going to sell these houses to if people are not having a job? If unemployment is bad?
Now, just to first kind of set the context for this, it is now the middle of July or the third week of July as I’m recording this and they just reported last week’s numbers. Another 1.4 million unemployment filings, which means since March there’d been over 52 million Americans that have filed for unemployment. We’re talking unbelievable numbers, you’re talking if unemployment was tracked today the way that it was tracked in the 1930s, we are right now having the highest unemployment in the history of America.
Now, the reason our unemployment numbers appear to be a lot lower today than they were back in the great depression is because the government tracks unemployment statistics differently today than they did back in the 1930s.
So with that being said, there is massive unemployment going right now, the economy is in a tailspin. The stock market’s still going up, but it’s disconnected, it’s totally disconnected from the real economy. You have the real economy and then you have the financial markets, and they are not connected, they’re not the same. So that just being a context, so people ask me about what I think about investing in the stock market, I tend to subscribe to what Robert Kiyosaki said trains in his teaching on investing. He said, “It’s not a question of “Is the stock market a good place to invest?” The question is, “Are you knowledgeable, are you a good stock market investor? Do you know what you’re doing?” Same with precious metals, gold, silver, any commodity, any asset, class, real estate, same way. Is real estate a good investment? Well, it is if you know what you’re doing. Okay, if you are a knowledgeable investor, it is. If you’re not, you can lose your shirt.
So the question here is, who are they going to sell houses to if people don’t have a job? Well, they’re not going to sell it to people who don’t have a job, but there’s always going to be people that have a job. And so for every piece of real estate, there’s always going to be a buyer.
Now, the challenge is when there are fewer buyers and more sellers, what happens? Well, what happens is the fewer buyers, they have more houses to choose from, house prices are going to come down. So who’s going to buy them? People that are looking to buy a house today. How much they are going to pay for is a function of supply and demand. And when there is a much greater supply and a lot lower demand, prices are going to come down because the buyers are going to pick the houses that have the best house for the money.
Will home prices go up with inflation?
SY asked Kevin, “If mass inflation happens in the near future.” Now I’m not really talking about inflation, not at least in detail. “But if mass inflation happens in the near future.” And to be honest is probably not going to happen in the near future, it may happen in the distant future, but in the near future, meaning in the next six months to 12 months we’re probably not going to see massive inflation. Once we get 12 months out next year, 2021, anything goes, especially after the election.
“If mass inflation happens in the near future, would real estate go up with inflation even if there are fewer buyers? So with the right thing be to hold on mortgage in longterm with inflation?” Okay, so the question is, if there is massive inflation, I’m going to presume from that they mean hyperinflation. Hyperinflation means the dollar becomes worth a whole lot less, and therefore it takes more dollars to buy the same thing. Well, massive inflation, we’ll call it hyperinflation, where inflation goes up in double digits every year and can be going up … literally it can be going up double digits every month if you get into hyperinflation.
With the feds printing an unlimited supply of money, every dollar that’s already in existence becomes worth less because there’s nothing backing it up. So the question is, if inflation shoots through the roof, are house prices going to shoot up? If today it takes $5 to buy a loaf of bread or whatever it is, okay, $5 to buy a loaf of bread. And if two years from now, it costs $50 to buy a loaf of bread because of inflation. That means it’s costing 10 times as much to buy a loaf of bread, are houses going to be 10 times expensive? And the answer is probably not.
There is a thing going on right now, and I think they call it stagflation or in-deflation where you literally have inflation and deflation happening at the same time and it depends on what it is. So consumer products can be like you’ve noticed grocery prices going up, there’s inflation. But housing prices are not, there’s deflation in a lot of things because there’s less people who have money to buy a lot of things, so people are spending less money. So there’s deflation in some areas and inflation in other areas. So that is going to happen.
What’s going to happen with real estate? I would not count on real estate appreciating dramatically to keep up with inflation if the dollar starts losing its value. Now it’s possible, but if that happens, we have a much bigger problem of what hyperinflation does to the economy and what actually ends up happening to the dollar itself. And that’s one of those scenarios where all of a sudden gold and silver become the right place to have your money, not in real estate. But that, again, there’s a whole lot of factors and a whole lot of uncertainties, they go into play to make that happen. As long as the US dollar is still the reserve currency of the world, the global reserve currency, the US dollar is fairly strong and fairly stable. If China, they ever create a separate reserve currency that other countries start trading on, then all bets are off.
Will rental prices go up or down?
“Kevin, please tell us What do you think rental properties are going to do? Are rental properties going to be forced to lower their rents due to unemployment and competition between rental property owners? I love your videos, I’m already a subscriber, please advise.”
Okay, so are rental properties, if you own cashflow real estate, rental properties, are rents going to go up? Are they going to go down? Well, this gets into another thing that it depends on the area. So we talk about the real estate market, there’s really not nowadays a one real estate market even across the United States. There are pockets of real estate.
In fact, I had one comment on one of my videos recently that said, “The one thing you’re not talking about is you’re not talking about the power of location.” Remember location, location, location. They kind of chastised me for not bringing that up, location and it’s a great point because location is really, really a critical factor here. And especially when you see things that are happening, like they talk about in the big cities like New York and Manhattan, where people are fleeing the cities and heading out to the suburbs.
With that kind of stuff happening, then you’re seeing massive vacancies, you’re going to literally start seeing price drops in certain areas while prices are going up in other areas. So you have people leaving big cities and going to suburbs, or going to smaller cities, or leaving one state and going to another state.
We’ve been seeing that now for the last several years where a lot of people are moving out of places like California, where I live, they’re leaving California and go to Texas where I’m from. There’s a ton of that happening.
So those kinds of forces mean that what’s happening in one market may not be the same as what’s happening in another market. So where you have rents right now, the rents are going to be dropping dramatically, it looks like in New York City. But there’s going to be other places where demand for rents are going to go up.
So the short answer is, it depends. I know that’s not what you want to hear, but it depends. There are some areas where rents are going to go up and demand is going to go up. And there are others where rent is going to come down because demand is going to drop. So you have to study and pay attention to your market or find a great real estate agent or broker that is savvy of what is actually happening in the residential real estate market if that’s what you’re looking at.
Now, the same thing is true in commercial real estate, is what’s going to be happening in commercial real estate? Well, it depends on what type of commercial real estate we’re talking about. Retail, big trouble, restaurant, big trouble, hotels, hospitality, travel, all of that, that kind of real estate is in big trouble right now. What’s in big trouble right now may not be in big trouble in a year or two or three. And sometimes it’s going to be worse.
Office space, with more and more companies letting their people work virtual, companies are going to be downsizing their amount of office space. And over the last 10 years, there’ve been massive amounts of commercial real estate being built and developed and high rise and office buildings and all this kinds of stuff. There’s going to be a lot, a lot, a lot of vacant commercial real estate. So that is going to drive prices down, both in terms of rents and in terms of property values. And with all of that, there’s going to be a lot of opportunity, but not yet. Because it takes time for real estate prices to adjust with the changes that are happening in the economy.
What will happen with interest rates?
So Tony says, “What do you think is going to happen with interest rates?” Well, interest rates are going to stay low. They’re period, end of story. For the foreseeable future, interest rates are going to stay low, with the feds printing the kind of money they’re printing and the national debt doing what it is doing, there are no options. They cannot raise interest rates, interest rates are going to stay low for the foreseeable future.
From illegal immigration, something or other, “I’m curious, the media keeps talking about housing going up because of money printing. I do realize that the jobs are the issue, my view is that the economy is in terrible trouble because you can’t pay for a mortgage if you don’t have a job. Can you shed some light on this to straighten out my thoughts?”
Well, I pretty much have already addressed this. Housing prices are really not going up because of money printing. They’re going up … like in some areas, they’ve still been going up here in the 2020, even during the pandemic. They’ve continued to go up because of low interest rates and pent up demand. Not so much because of the Fed’s printing money. [inaudible 00:14:50] printing money has kept the stock market going up, but not so much housing prices going up.
And then the next question from Desiree, “what about land or lots? What about buying vacant land? Wanting to build a home, we’re in Austin, Texas, ready to buy land.” Now, the same principles apply to this as well. If you’re buying a land or lots, it depends on why you’re buying it. So if you’re buying it as an investment, the biggest problem with buying vacant land is you don’t make any money on it, so there’s no cash flow. So you’re buying something speculating that is going to someday appreciate. However, if you’re buying it to develop it, then it’s a different conversation. Now here they’re talking about buying it to build a home on, well, that’s fine. If you want to buy a piece of land, get a good deal on it right now.
Again, real estate is expensive right now. It has gone up, up, up, up, up, up for the last 10 years, almost universally across the United States and in most places around. It has continued to go up and it is still high.
So if the economy tanks and continues to tank as it is, and whenever the moratorium on foreclosures is lifted, whenever forbearance starts running out, when this unemployment … people finally, all this hits. The housing market is going to be flooded with inventory, there’s going to be houses coming on the market, there’s going to be fewer buyers and home prices are going to start going down. And with that, all real estate prices will eventually come down.
The question is how long you want to wait? What kind of position are you in to buy right now? If you can get a good deal on a lot and you want to build on your own, subcontract it, whatever. Right now, there’s probably going to be a lot less building going on, so you’re going to be able to find subs, subcontractors, your vendors and all that, your services. You’re going to be able to hire them a lot cheaper than you could have a year ago. Because they don’t have work. So just having it built, if you’re hiring it out and you’re contracting yourself or whatever, then if you can find the deal and you know what you want, you’ve got the money and you’ve got the financial stability to do it. And you know that’s what you want to do, then it’s a personal decision. Is it a good real estate investment or a good use of your money? Probably not. But most people do not buy and sell their home as an investment. They buy it because they want a place to live.
This is just a reality, people buy a house because they want a place to live. And they buy it for what they want and they buy what they can afford because they enjoy living there. So you got people that are going like, “I want to buy right now, interest rates are low. Is it wrong for me to buy right now?” Well, not if you have the money and not, if you have a good job and stable income. And you’ve got the financial depth to weather the storm, however bad it goes, and you can get a good deal on a house. And with interest rates low, you can buy a house and if you’re happy and as long as you can make your monthly payments and you’re happy, go for it. If you’re asking, is it a good financial investment to buy now? Or should I wait and get a better deal a year from now or two years from now? If you’re looking for the best deal, I would wait.
But that means until then, you’re going to live somewhere. So you’re going to rent, whatever, again, those are personal decisions, but most people do not buy and sell their own personal residence as an investment, they buy it for lifestyle, they buy it for how they want to live. Because that’s where you sleep, it’s where you eat it’s where you relax, it’s your castle, it’s your home, it’s where you have security. So those are a lot of factors that go into that.
So that is all the questions I’m going to answer today. But I really appreciate the engagement that you guys have had with me on a lot of my videos, asking questions and posting those. Sometimes I’ll do individual videos on real estate related questions for real estate agents that I’ll do one video per question. But in this case, we had a lot of questions about the market and all of that because of what’s happening. So I just wanted to shoot this video, I hope it’s been helpful for you. If it has, give it a thumbs up, let me know what your thoughts are, what I’ve missed, what you want to hear more about. And thank you for watching. I’ll see you on the next video.