Real Estate Market Outlook: What's Ahead for Buyers and Sellers

00:00:12 - Mike Mills
Hello.

00:00:12 - Mike Mills
Hello, everybody, and welcome to the Texas Real Estate and finance podcast. I am your host, Mike Mills, local mortgage banker here in the Dallas Fort Worth area. And today we are visiting with a good friend of the show who's been here the most appearances of anybody. I don't know if we're up to six or seven at this point.

00:00:29 - Conrad Jackson
Record appearances.

00:00:30 - Mike Mills
Record appearances. But we're going to chat a little bit today about the housing market, kind of interest rates, housing affordability, all kinds of stuff. We're kind of spitballing today because there's a lot of topics I want to discuss, and having Conrad here is going to make it easier for us to chat. So let's welcome Conrad to the show. Hello, Conrad.

00:00:51 - Conrad Jackson
Thank you. Thank you for that huge applause.

00:00:54 - Mike Mills
That was loud. That was loud. I got to watch my volumes over here.

00:00:57 - Conrad Jackson
I know, man.

00:00:57 - Mike Mills
That was loud.

00:00:58 - Conrad Jackson
Before we get into anything important, let's talk about something that's more important. The Mavs and this trade, did you see it?

00:01:06 - Mike Mills
Yes, I just saw it come across a minute ago.

00:01:08 - Mike Mills
Yes.

00:01:09 - Conrad Jackson
So Grant Williams, Seth Curry, first round pick for PJ Washington.

00:01:14 - Mike Mills
Okay.

00:01:15 - Conrad Jackson
How you feel with the Hornets?

00:01:16 - Mike Mills
A resident basketball expert, man.

00:01:19 - Conrad Jackson
You know what? I think I like it.

00:01:21 - Mike Mills
Okay?

00:01:22 - Conrad Jackson
I think I like PJ Washington is another threat. It's another bucket that we can get. Grant gave us some good minutes, but PJ can do more than what Grant can do. The pick is the pick. I mean, you get picks, you give. It is what it is. But, man, I really think I like that trade.

00:01:43 - Mike Mills
Okay, well, I mean, time will tell on all that stuff, and I don't pay enough attention until the Mavs get to the playoffs, typically, to see what's going on, although it looked like with their record lately, that that's diminishing every day.

00:01:53 - Conrad Jackson
Well, we need another score. We need another threat. Kyrie's been hurt, so him getting him back recently has helped a little bit. Luca's been playing out of his mind just because that's. He can't carry the team the whole season and the playoffs, so we need somebody to take the load off when he needs a rest. And it sounds like they're making an attempt to do that, which I appreciate as a Mavs fan.

00:02:14 - Mike Mills
They're trying. All you can do is try, right? You can't just sit on your thumbs, see how it works out. I mean, anything's better than watching the Cowboys play, man.

00:02:22 - Conrad Jackson
So disappointing. Cowboys. Come on, Jerry.

00:02:25 - Mike Mills
That was horrible.

00:02:25 - Conrad Jackson
Figure it out, man. I need you to figure out. Look at what Cuban's doing with these trades man. He's trying to make moves, move some pieces around. All these guys floating around all season, we don't pick up anybody.

00:02:33 - Mike Mills
Cuban? Cuban's not really. Oh, yes. Right, team? Yeah, he's still running the show, but. What do you mean? They haven't passed any laws yet about casinos? What are you talking about? Are you. I mean, it seems od that Jerry Jones has partnered up with Windstar, and Cuban just sold the teams to a casino magnate.

00:02:58 - Mike Mills
And then.

00:02:58 - Mike Mills
Did you see that? They're building a. So they're on Lake Texoma. They're building, like, a billion dollar Jimmy Buffett Margaritaville resort on the Texas side of Lake Texoma.

00:03:08 - Mike Mills
Nice. Nice.

00:03:09 - Mike Mills
On the Oklahoma side of Lake Texoma, they are building a hard rock casino, restaurant, hotel.

00:03:18 - Conrad Jackson
Okay, I had an opportunity, and this sucks, because now I'm kicking myself. There was, like, 3.8 acres, just like the last exit before you get to Lake Texoma. The guy had built a cabin, right? Actually had some friends who stayed in that cabin shortly afterwards. But the 3.8 acres had, like, I want to say he had it projected out where you could build, like, seven little cabins on that property. And it was literally the last turn before you got to the lake. So you could actually walk to the lake, if you didn't mind walking 1015 minutes or whatnot down the road. And it was a great deal. And I was thinking, man, I should do this. But I didn't know anything about Lake Texoma or that area or anything, so I didn't do it.

00:04:06 - Mike Mills
And now I'm like, hindsight is always 2020, man. Hindsight is 2020. Well, and so they already said they're putting a casino in the hard rock. Yeah, they've already said that. And the article said, no plans yet for putting it on the Buffett Margaritaville side. So if you don't think they're bringing casinos to Texas.

00:04:24 - Conrad Jackson
It's coming. It's coming, it's coming.

00:04:26 - Mike Mills
It's just a matter of when.

00:04:27 - Conrad Jackson
I actually had that conversation with one of my clients here in the last month, a couple of weeks ago, we were talking about it. He's got a house that's over in Irving, and good friend of mine, man, and we talked about it. He's renting his house out.

00:04:41 - Mike Mills
Dang.

00:04:42 - Conrad Jackson
A brand new house, but he's renting it out. And he was like, man, do I put it up for sale or for lease? We looked at the for sale comps, and they were monumental. I mean, monumental from where he bought it three years ago. I mean, it's just appreciation. He's right there in the midst of the highways, every great location. And I said, man, that's a lot of money. He said, what do you think? I said, well, I feel like if we were to get a casino for this new Mavs deal, it's going to go across street from you.

00:05:09 - Mike Mills
Yeah.

00:05:10 - Conrad Jackson
So he decided to lease.

00:05:11 - Mike Mills
Yes.

00:05:12 - Mike Mills
Keep it.

00:05:12 - Mike Mills
It's going up. It's going up. And you know what that all bleeds into? What we want to talk about today is, like, market knowledge.

00:05:20 - Mike Mills
Right?

00:05:20 - Mike Mills
Like, as realtors today being, buying and selling, people are hesitant because rates are high, people are hesitant because there's not a ton of homes available that they can find and they don't know what to do. So they're going to agents and they're asking, should I buy right now? Should I sell right now? What should I do? And knowing things like this and being conscious of what's happening in particular areas and where builders are going into, if they're building a casino across the street from your rental property, if that's going to make sense, to hold onto it, these are things that you need to know as an agent and being an expert in an area in order to properly guide your buyers and sellers, for sure. Right. I want to talk about something that we chatted about before we started the show, which is we're moving into 2024.

00:06:03 - Mike Mills
Right?

00:06:03 - Mike Mills
2023 sucked. It just sucked. It sucked for everybody.

00:06:07 - Mike Mills
Okay?

00:06:08 - Mike Mills
I'm sure there's a few people out there, like, I had the best year of my career. Okay, great. It's fine.

00:06:12 - Conrad Jackson
Congratulations.

00:06:12 - Mike Mills
All right? Congratulations to you. But you're not the norm, okay? So you exist. I'm sure you're there. Congratulations. Way to go. But most people, most agents, most lenders, most title companies, everybody was sucking wind in 2023. Yeah, right. But why do you think it is that when you go on Instagram, you go on Facebook, you go on all the social media platforms, it looks like everybody's living their best life and doing great. And then realtors, lenders, everybody compares themselves and says, that person's doing amazing. And I'm not. I know I'm not. So I might as well just quit because obviously I'm not good at this business.

00:06:45 - Conrad Jackson
Yeah, I've said it before, even on this show, man, perception is reality for most people. So they're trying to make you perceive that. They're trying to give the image that, hey, I'm okay. I'm still killing it, because if I'm still killing it, you're going to want to use me before you use the next person. And realistically, people have already decided whether or not they want to use you, whether you're killing it or not. People have the relationship or they form their opinion about you already. And so I try to tell folks, man, just be yourself. Like you said, 2023 was a hard year. My whole team was down last year from the previous year. And you're talking about anywhere from 40% to 50% down. Yes. And most of it came in the last quarter of the year. So, I mean, it is what it is, man, but it's a tough business. And like we talked about, man, our realtors, lenders, we're in the same areas. We're selling the same streets, we're selling the same neighborhoods. We're competing against each other with the same people. If you're just killing it, what's your secret? Versus the other 99% that are out here doing the same things that you're doing or similar things? Not to say that nobody can't kill it in a market like we're trying to come out of, but, man, you don't have to give that perception that I'm untouchable.

00:08:12 - Mike Mills
Yeah, well.

00:08:12 - Mike Mills
Or even just the fact that if you're an agent and you're seeing people online and you're thinking and you're comparing what you're doing to what they're doing, it's not the way to do it, because, a, you don't know that what they're telling you is true, number one, or just giving. I mean, I've seen agents before, post contracts that they've closed or houses they've done multiple times, the same property with a different picture, different whatever. Look, I'm not hating on you. Do what you got to do. Make your world reality. I'm fine with it. But if you're looking at that and you're seeing that and you're going, man, I'm not making it.

00:08:50 - Conrad Jackson
I did that a lot, especially when I first started in real estate. And there was particular agents in our area that were just selling so many homes. And every time they sold, the number went up, number went up, number went up, and you're talking about, like, 150 plus 200 homes. And it's just like, how are they doing it? Why am I not able to do that? And then you dig a little deeper and you start to get the backstory is that particular person I was comparing to, they basically are charging nothing for their sales. They're paying high referral fees, or they're just not charging hardly anything, just a small transaction fee in order for you to use them as their agent. And so it was basically just volume with no substance attached. And I'm just like, how do they make a living? You don't know that without having that backstory or that information. But it's just like, yeah, that's why you shouldn't compare. Yeah, you should just work.

00:09:45 - Mike Mills
Yeah, just work. Just do you do the best version of you you can do every day and get up and work and go do. I mean, we were talking about, the reason my voice sounds like crap right now is because, I don't know, my whole family has been sick. I avoided it for the most part, but woke up with a hoarse voice today. But everybody's getting sick around you. It seems like these days, like the last two weeks, like, everybody I talk to is sick and sick for a long time. But even like we were saying beforehand, I still got to get up, I.

00:10:14 - Mike Mills
Got to get up.

00:10:14 - Mike Mills
I got to do work tomorrow. How do I feel? Like you got to keep grinding. It's just what it is.

00:10:19 - Mike Mills
Yeah.

00:10:19 - Conrad Jackson
That's the secret to success. I feel like if you can just get through it, just weather the storm. The last quarter of 2023 was tough, man, for sales, for inventory, for everything on the build side, on the investment side, everything was tough.

00:10:35 - Mike Mills
Yes.

00:10:36 - Conrad Jackson
Right. And I just kept telling folks in my circle, I'm just like, look, just weather the storm. If you can weather the storm, just keep showing up. If you keep showing up, I guarantee you, you make it through this. And if you make it through it, you'll look back and say, man, if I can survive that, I can survive anything. That was tough, even for us, man. It was just no homes moving, had all these listings, and they're just sitting there. What am I doing wrong? You're not doing anything wrong.

00:11:00 - Mike Mills
No, it's the market. Well, and it's kind of like a little bit of darwinism at its finest in that if you take a single celled organism in a pool of water and they're all thriving because the environment is great and they're doing awesome and everybody's multiplying and they're having other organisms, whatever, and then something changes in that environment that those organisms have zero control over.

00:11:25 - Mike Mills
Right.

00:11:25 - Mike Mills
They have no control over, but something changes, whether the temperature changes two degrees or a new bacteria gets added to it or whatever, a good portion of those organisms are going to die off because they can't adapt to the change in the environment, and then another portion of them are going to survive and they're going to thrive. Because there's something else about them. There's something in their genes, whatever, that allows them to survive that change in environment. And the truth is that we went through three years of, really, 2020, 2021, and most of 2022. We went through three years of just insane growth.

00:12:01 - Mike Mills
Right.

00:12:02 - Mike Mills
Everybody in their dog was getting into our business, for sure. We had an event at the Arlington board of Realtors yesterday and had a speaker come in, and he had a great analogy, and I really liked it. He was talking about comparing it to double Dutch.

00:12:16 - Mike Mills
Okay.

00:12:16 - Mike Mills
And he was saying that when you do double Dutch, okay, you got two ropes going well when it's going fast. And if you're good at getting in and out when it's fast, you look like a pro. Those ropes are swinging, you're moving, you're bouncing, you're in and out. But then the moment the ropes start to slow down because you're just used to going fast, and now you don't know how to adapt your movements because things are going slower, and then you're not as good at what you did before because you only knew how to operate when it was going at full speed. So having to figure out how to change your business model, what you do on your day to day activities, whenever things are down, and not only that, but getting your head in a place to where you're not waking up every day, poor me. This life's not working out for me. The world hates me. All that kind of stuff. You got to get past that stuff.

00:13:06 - Mike Mills
Yeah.

00:13:06 - Conrad Jackson
I mean, that's a big indicating factor of how you're going to be able to perform. Also is if you turn on the tv and everything, it's terrible. It's low, it's terrible, it's slow. And then you get out and you're like, man, do I even want to do this? And then when I do want to do it. Oh, man. But it's flow. So I made one call a day. That's good enough, right?

00:13:23 - Mike Mills
Yeah.

00:13:23 - Conrad Jackson
As opposed to ten calls. I made one or 30 or whatever.

00:13:27 - Mike Mills
I did two.

00:13:28 - Conrad Jackson
So it's one of those things where you just kind of have to get out of your own head, stay focused, stay positive, but be realistic. You don't have to go on Instagram saying, hey, I sold more homes than anybody else when you really didn't.

00:13:40 - Mike Mills
Right. Well, you even said, I mean, and I hope you don't mind me saying, but you've been doing this a long time, right? 20 plus years at this point, 18. Okay.

00:13:50 - Conrad Jackson
No, this is your 19.

00:13:51 - Mike Mills
We'll round up yeah, you're at 20.

00:13:53 - Mike Mills
All right.

00:13:54 - Mike Mills
So we've been through the crazy times before eight and what happened there. You've been through what happened in eight and all the lead up to that. And I think you told me there hasn't been a month in your career, right. That you had not closed at least.

00:14:09 - Conrad Jackson
One in the last decade.

00:14:10 - Mike Mills
Yes.

00:14:11 - Conrad Jackson
That I didn't closed one house.

00:14:13 - Mike Mills
Yes.

00:14:14 - Conrad Jackson
And then this past August, no closings.

00:14:17 - Mike Mills
Yeah.

00:14:17 - Conrad Jackson
I was just like, man, what is going on?

00:14:20 - Mike Mills
Right.

00:14:21 - Mike Mills
And don't get me wrong, you're going to second guess yourself, right?

00:14:25 - Conrad Jackson
Yeah. Like, man, what am I doing? Am I good at this anymore? Am I not motivated? I swear I made the calls. I swear I had the listings. It just didn't work out. So it's just one of those where you got to kind of pull yourself together and be like, okay, no, get out of your own head. Let's go.

00:14:43 - Mike Mills
Yeah.

00:14:43 - Mike Mills
Well, and that's the time when it's almost kind of a gift in that you're given time now, right?

00:14:49 - Mike Mills
Yeah.

00:14:49 - Mike Mills
Now you have time.

00:14:50 - Mike Mills
Right.

00:14:51 - Mike Mills
So if you have time, then what are you going to do to take advantage of that time?

00:14:55 - Mike Mills
Exactly.

00:14:56 - Mike Mills
Are you going to ramp up your marketing efforts? Are you going to network with more people, make more phone calls? What are you going to do in that dead time? Or are you just going to sulk and feel sorry for yourself? This is what a lot of people do, is they find other things to busy themselves with.

00:15:12 - Mike Mills
Right.

00:15:13 - Mike Mills
So I'm not closing loans or I'm not closing buyers or sellers. So I'm going to remodel my back porch or I'm going to go.

00:15:23 - Conrad Jackson
Usually everything involves spending money.

00:15:25 - Mike Mills
Yes.

00:15:26 - Mike Mills
I need to go buy this new thing that's going to help me at my house. But you just kind of find busy work to do, and then you get so wrapped in doing all of the busy work that you look up and four months later you've literally done nothing to build your business.

00:15:41 - Mike Mills
Yeah.

00:15:41 - Conrad Jackson
And that's the one thing that when I went through that in August where it's like, all right, I didn't close one home and, you know, halfway through the month.

00:15:49 - Mike Mills
Okay.

00:15:50 - Mike Mills
Yeah, it's not going to happen.

00:15:51 - Mike Mills
Yeah.

00:15:52 - Mike Mills
You're hoping like August, I can close.

00:15:55 - Conrad Jackson
Quickly, but I'll throw an investment in here. I'll put that up for. I was doing that, too. I was putting my investment properties up for sale.

00:16:01 - Mike Mills
Let me get a close, see if I could get something going.

00:16:04 - Conrad Jackson
And it's like they weren't moving either. So it's just like oh, man. Are my properties any good? I put them up for you, start to question yourself. But that was halfway through the month. If you've gotten to that far and you know it's not going to happen. I started to get scared and like, all right, well, I cannot have this two months in a row because pride starts to take over. I've been doing this way too long for me to have two months of nothing. And then you start to kick it into high gear. Okay, well, if I need to make ten calls a day now I got to double it up. I got to make 20, I got to make 25, I got to make 30, I got to do whatever it takes to get these things on the books to make sure that we're a being productive with our day and our week. So that way we don't see the same results every month and it just spiral out of control.

00:16:46 - Mike Mills
Well, and on that, too, I want to be clear. Anybody listening to this, Conrad saying I didn't have a closing in the last ten years, in one month and this is the first time. And some people are going, even during my best years, I'd go two months without a closing. Okay, you have to understand, everything is about who you are. This goes back to, don't compare yourself to other people.

00:17:06 - Mike Mills
Right.

00:17:06 - Mike Mills
If the success for you is closing six loans or closing six buyers or sellers throughout a twelve month period and making 50, 60, 80,000, whatever it is that you make and you're happy with that, and that gives you time with your family and gives you time to, then that's great. You don't need to sell one every single month. You don't need to. That goes back to you focusing on you and what makes you happy and what makes you successful and not comparing your success to somebody else because their definition of success versus your definition of success can be completely different. And that's perfectly fine because Conrad's got twelve kids and a wife and 25 rental properties and apartment copies, everything.

00:17:52 - Conrad Jackson
I need to be selling houses every single day. Put it like that.

00:17:55 - Mike Mills
Yes.

00:17:56 - Mike Mills
You don't have a choice. I had one of my boss from back in the day who I love death still, but he told me a long time ago, he's like, you want motivation to go sell? He's like, go buy a car. And I'm like, what do you mean? He's like, because now you got to pay that bill. Now, I'm not recommending that. Don't go out and buy a car. But I'm saying whatever your motivation is to get you out of bed every morning that you need to get going. You got to find it.

00:18:18 - Conrad Jackson
You got to find it, man. There's plenty of opportunities, have motivation to.

00:18:21 - Mike Mills
Get out of bed and go to work.

00:18:23 - Mike Mills
Yes.

00:18:23 - Conrad Jackson
You just got to open your eyes, man. You got to get out there. That is the key, man. We're just trying to, like I said, make sure that we're doing the right things. Staying motivated, staying away from all the negativity. That's the hard part these days.

00:18:38 - Mike Mills
Well, and you have to be aware of what's happening, right. Because we may get to some of. There's a few things I may be telling you today that might not sound. I'm being a little negative. I'm not being negative. I'm just saying here's what's going on and you have to be aware of it so you can prepare. What you have to keep the negative out is the negative in your world. I'm aware of situations, right. I'm aware that my car has a flat tire.

00:19:01 - Mike Mills
Right.

00:19:02 - Mike Mills
But it doesn't mean that it's going to ruin my day. Like, I'm going to fix it. I'm going to get it taken care of. But having a flat tire out of nowhere is a negative thing. But if you just ignore it, you can't just drive around with your car, not have it doesn't work. So you have to be conscious of what's happening around you, but you can't let it put a negative spin on everything else that you do all the time.

00:19:21 - Mike Mills
Sure.

00:19:21 - Conrad Jackson
And just dwell in that negative environment for the rest of the day because of that one thing or two things that happened to you earlier, later on.

00:19:28 - Mike Mills
In the day because it will make you miserable. So I'm curious. So the biggest thing, we talk about it all the time is rates, rates, rates, rates, rates. Everybody's about rates, right? So I'm going to go into where rates are, where they're going, all that kind of stuff. But I want from your point of view, because you're talking to buyers and sellers every day, what are you hearing as a realtor when you're talking to your clients on a regular basis? Are they asking about rates? Do they really care that much about it from their perspective? What's going on?

00:19:56 - Conrad Jackson
My sellers, so I had some sellers who decided to list last year, and then they decided to take it off and wait and see how the rates did and then come back this year, which we've put them back on the.

00:20:05 - Mike Mills
Market because they were going to buy later or because they just didn't know how well they'd be able to sell.

00:20:10 - Conrad Jackson
They didn't know how well they'd be able to sell.

00:20:11 - Mike Mills
Got you.

00:20:12 - Conrad Jackson
Right. And so the first thing that those sellers ask me is, what are the rates looking like and how's that affecting people coming? And look at these properties. How will that affect my home? And so I just tell them, hey, this is where the rates are. This is where I feel like it's going to go based off all the economic forecasting that people are saying. But ultimately it's your decision. People will still have to buy and sell homes, and if you have a need, you need to put that home out there the right way at the right time. And that's what they did. That's what they ultimately end up doing. But they're very conscious of it. The buyers, typically, the buyers are coming in saying, hey, we have an idea of where the rates are. We're going to try to get the seller to contribute some closing costs so that way we can get it down further. The builders are typically leading their advertisements with rate buy downs. Yeah, it's at the top of everybody's mind right now when they're trying to make a decision. And what was keeping people on the sidelines was the uncertainty, is it going to go up again? Is it going to go up again now that it's kind of hovered and trickled down a little bit, now people are less, they're making less decisions based off of, is it going to go up again?

00:21:28 - Mike Mills
Right.

00:21:28 - Conrad Jackson
They're just saying, hey, am I comfortable at this price point?

00:21:31 - Mike Mills
Right.

00:21:31 - Conrad Jackson
And so that's what I'm seeing on the buy side and the sell side. On the investor side, rates don't matter, but they don't matter like it's your primary residence. We're typically calculating our numbers and the rate is just part of those numbers. And if those numbers work, we go ahead.

00:21:45 - Mike Mills
And because rents are going up, too.

00:21:47 - Conrad Jackson
Rents are going up, but also people are very conscious about what they're paying on the rental side as well. I think the lack of inventory has forced rents to stairstep their way in an upward tick because people are wanting to rent longer. They're wanting to rent in places that they necessarily didn't want to rent before because it's affordable, as opposed to taking a higher rate and then turn around and buying something at a lower price than they typically were approved for. So rates are still affecting everything. It's just a little bit different than it was this time last year.

00:22:27 - Mike Mills
Well, so a couple of things. So on the builder side, of things. And this is the most sales that occurred last year were on the builder side. They took up almost 50% of the market. And it wasn't necessarily because of the buy downs of rates, but it was because they were the only inventory.

00:22:46 - Conrad Jackson
They had product.

00:22:47 - Mike Mills
They had product.

00:22:48 - Mike Mills
Right.

00:22:48 - Mike Mills
Because people were not moving out of their homes because they're sitting there with a two or 3% interest rate, and they're like, I'm not going anywhere unless I have to right now. The downside is they're also sitting on something crazy, like. And I have it right here. I'm looking right now. I saw this the other day. So 38.7% of people own their home free and clear right now.

00:23:09 - Mike Mills
Yeah.

00:23:09 - Mike Mills
So almost 40% of homeowners free and clear.

00:23:13 - Mike Mills
Okay, that's crazy. Right?

00:23:15 - Conrad Jackson
Crazy.

00:23:15 - Mike Mills
Now, that's also because. And I don't have this stat in front of me. Exactly, but it's something like 50% to 60% of homeowners are boomers. They have the money.

00:23:25 - Mike Mills
Right?

00:23:26 - Mike Mills
So 40% owner, free and clear. Almost 30% have mortgages with 50% or more equity. So they're sitting on a ton of equity.

00:23:35 - Mike Mills
Right.

00:23:35 - Mike Mills
And then there's only about 30% to 33% of folks that have less than 50% equity.

00:23:43 - Mike Mills
Yeah. Okay.

00:23:44 - Mike Mills
And most of those people bought within the last three years.

00:23:47 - Conrad Jackson
I mean, even for us, man, we bought our house, it'll be five years in April, and we're sitting on about 50% equity. I haven't done anything to it.

00:23:56 - Mike Mills
No.

00:23:56 - Conrad Jackson
It's just that 20 20, 20, 21, 20, 22 just supercharged the appreciation. And now that hasn't gone away.

00:24:05 - Mike Mills
Yeah.

00:24:06 - Mike Mills
Well, here's something. I'm going to kind of go all over the place with this, because my brain does this sometimes. And we'll get back onto rates in just a second. But you have to understand, when you talk to your clients about housing, okay, we talk about. And I hate this. What was that thing everybody was saying? Buy the house, marry the house, date the rate. Hated that. All right. Not a fan of that statement.

00:24:29 - Mike Mills
Okay.

00:24:29 - Mike Mills
But not because it doesn't have some element of truth to it. It simplifies things too much.

00:24:35 - Mike Mills
Okay.

00:24:35 - Mike Mills
You cannot predict where rates are going to go in the next three to five years. You just can't.

00:24:39 - Mike Mills
Right.

00:24:39 - Mike Mills
And to sell somebody on the idea.

00:24:41 - Conrad Jackson
That you didn't do one of those videos. No, I saw about 17 of them.

00:24:47 - Mike Mills
I would certainly say. And this is why I still say buying is important. But it's not about hating the rate. It is about the fact that first off, our entire economy, the US economy, since we came off the gold standard, is built on debt. Our money gets created by debt. Regardless of what anybody thinks, that's how it works. All right? I saw this the other day. I always forget the numbers.

00:25:13 - Mike Mills
Exactly.

00:25:13 - Mike Mills
But let's say it's 70% to 80% of the debt that is created is created on housing.

00:25:19 - Mike Mills
Yeah.

00:25:19 - Mike Mills
All right, so for anybody that doesn't understand how this works, a bank that holds, let's say, a million dollars in cash in the bank, all right, they can lend out $10 million worth of money to other individuals based on the million dollars that they hold in reserves in their bank. Something like that.

00:25:38 - Mike Mills
Okay?

00:25:39 - Mike Mills
So what that means is that, that $9 million, they just created it out of thin air.

00:25:45 - Mike Mills
All right?

00:25:45 - Mike Mills
It didn't come from anywhere. It literally just created out of thin air. All right? So most of that money gets lent on assets. Real estate, residential, commercial, even stocks and commodities and things. That's where that money gets lent. People think that, oh, well, small business makes up, like, 10% or less of the money that's created in our system, which really shouldn't be that way. It should be going towards generating jobs that would actually benefit the economy.

00:26:16 - Conrad Jackson
Absolutely right.

00:26:17 - Mike Mills
But that's not how it works. It works as to the money that's being lent is primarily on real estate. So if our entire cash based economy is built off of lending money on real estate and continued growth, then where is the best place to have your money?

00:26:34 - Mike Mills
Yeah.

00:26:34 - Conrad Jackson
In real estate.

00:26:35 - Mike Mills
In real estate.

00:26:36 - Conrad Jackson
Come on now, people, all the time.

00:26:37 - Mike Mills
Okay?

00:26:39 - Mike Mills
There's nobody that can argue that being now, if you want to take a small window of time, if you want to go back to 2009 and show the growth of the market. I saw something the other day, too, where it was showing house appreciation. There was one year that it was down, and it was like 2009. It was down, like 8% across the board. Everywhere else has been up.

00:27:01 - Mike Mills
Okay?

00:27:01 - Mike Mills
If you owned a home and bought it ten years ago, your equity on that property is through the roof.

00:27:05 - Mike Mills
Okay.

00:27:08 - Mike Mills
I'm not a sousayer. I don't have a crystal ball. But I can't imagine a world where that's not going to continue into the future. Sure.

00:27:15 - Conrad Jackson
I mean, look at the same thing. When I was in college, I used to work as a stockbroker for a company, and I was teaching people how to make trades. And I remember we came in one day and the Dow had dropped 1000 points. You remember? That was like. Was that like 2010 or 2009?

00:27:33 - Mike Mills
Yeah.

00:27:33 - Mike Mills
Was it right during the great recession.

00:27:36 - Conrad Jackson
Dow dropped 1000 points, right? And it's just like, okay, you look at that snippet of time that month and it's like, man, the stock market was horrible. And then you look back ten years starting at that year, and you're like, it's pretty good. It keeps going up, it just continues.

00:27:56 - Mike Mills
To keep well and things change and shift. And that's another thing that I had written down in here, too. Let's take the stock market, okay? Right now, according to all economic indicators, the economy is booming. Yeah, all right, booming. However, I would imagine that if you ask the average Joe on the street right now how the economy is doing.

00:28:15 - Conrad Jackson
Especially if they just left the grocery store.

00:28:16 - Mike Mills
Especially if he just left the grocery store, he's not saying it's going too great. Right, but why is the stock market booming? Well, the stock market as a whole isn't.

00:28:25 - Mike Mills
Okay?

00:28:26 - Mike Mills
Right now we have seven stocks. Microsoft, Google, Nvidia, Facebook, Amazon and Apple. There's one other maybe Tesla, I think is in that mix too. That makes up the vast majority of the growth that we've seen. I mean, it's something like 70% of the growth that we've seen in the stock market over the last twelve months. Okay, seven, right. And of those seven, one of them is really the big dog, which is Nvidia. Nvidea is a company that produces chips. And with AI dominating everything like it has been, which it's going to get better or worse depending on how you look at it. Their stock price is through the roof and they're not even making any money, by the way, okay. When you look at their earnings versus their share price, it's insane how much it's off. But everybody knows that that's where the market's going. All the other stocks, every other stock outside of those seven is down.

00:29:22 - Mike Mills
Yeah.

00:29:23 - Mike Mills
All right, so if we're in any other period of time and you're measuring how the market's doing and those seven companies don't exist, everybody's suffering. And then people go, well, why is that? Why is it being boosted that way? Well, the vast majority of the money that goes into the stock market comes from people's 401 ks, okay? And those are managed by companies, not by individuals. So they're always shifting money into the area for growth. So if all the money and you have your portfolio manager that doesn't want you to fire him tomorrow because your portfolio is down 30%, he's shifting all of your money over into the things that are growing. All right, well, the things that are growing. Are those seven stocks? So everything else falls off and those continue to grow. Can't do it forever. There's always a little bit of correction that occurs, but that's where the growth is coming from.

00:30:08 - Mike Mills
There.

00:30:08 - Conrad Jackson
Here's a quick off topic, kind of on topic, but kind of going off the rails a little bit. What are your thoughts about? You're a big thinker and a broad thinker. What are your thoughts about.

00:30:19 - Mike Mills
Okay.

00:30:20 - Conrad Jackson
We're very chip reliant right now as a world. Yes. What are your thoughts on Taiwan and situation where it's like, all right, is that going to be okay or are we going to be able to produce enough chips here in the United States in order to be able to stay competitive? Because I feel like right now it's like whoever gets Taiwan is going to run the well.

00:30:45 - Mike Mills
So I think we talked about this a little bit the last time. Not this topic, but my philosophy on paying attention to those things is that there was a period of time where I was elbow deep into what I call politics porn.

00:30:58 - Mike Mills
Okay.

00:30:59 - Mike Mills
And that's what that is, is what's happening in China, what's happening in Russia, what's happening with our relations with them, who's controlling know, who are we about to go to war with? And I still see it on the peripheral, and I know we're about to start bombing a bunch of, what? We've already bombed a bunch of countries over in the Middle east with Iran being one of the main ones all over what happened in Israel and Gaza. And yet somehow, just like 911 led us into having a war with Saudi Arabia or with Iraq, which didn't really have anything to do with what happened or a little bit, but not a lot.

00:31:30 - Mike Mills
Same thing.

00:31:30 - Mike Mills
You have Israel and Gaza and Palestine having that issue there, and then we're over there bombing Iran because they're tied to, don't, look, I don't know enough about it to speak intelligently on it, so let's be very, but, so I'm sure there's somebody else like, that's wrong. This is how it.

00:31:46 - Mike Mills
Fine.

00:31:46 - Mike Mills
Fine. But what I'm saying is when it comes to the Taiwan and the chip manufacturing situation, I don't know. Honestly, I don't know. Because, does that scare you a little bit? It does and it doesn't. We have the biggest guns.

00:32:01 - Mike Mills
That's what I'll tell. Okay.

00:32:03 - Mike Mills
Like we, that's it.

00:32:04 - Conrad Jackson
Real quick summary. Know those who are listening or those who will listen that don't have an idea what the heck we're talking about. So Taiwan is probably the best and biggest manufacturer of chips, their whole country's ecosystem for chip making. So we are very dominant with all of our new technology, our iPhones, our octavisions, everything that we do computing, which.

00:32:25 - Mike Mills
Is why you couldn't buy a car during the pandemic, because everything. Everything was shut down.

00:32:30 - Conrad Jackson
Everything is chip reliant.

00:32:33 - Mike Mills
Yes.

00:32:33 - Conrad Jackson
So Taiwan being the main manufacturer of these chips that we need and the US kind of lagging behind Taiwan, from what I've read, from what I listened to, and from what I'm told from birth, they start molding you to make these chips. Your whole life is centered around you're going to make these chips. And so from also what I've heard, China is looking and very aggressive about wanting to control Taiwan and these chips, because the world is dominant on these chips. So if they get in control of these chips and we can't manufacture the chips at the same rate, the same technology and everything, then we will be very dominant on, very reliant, dependent on what happens.

00:33:19 - Mike Mills
Yes.

00:33:20 - Conrad Jackson
Well, they get control of Taiwan.

00:33:22 - Mike Mills
So there's two things happening there, okay? One is we, as a country, are told by the corporate media as often as possible that China is the big bad wolf.

00:33:34 - Mike Mills
Okay?

00:33:34 - Mike Mills
Just like Russia is the big bad wolf.

00:33:36 - Mike Mills
Okay?

00:33:37 - Mike Mills
We're the big bad wolf. Okay, first off, let's be real clear, but we're told that we need to worry about this stuff, all right? If you don't watch this stuff every once in a while, China's economic situation is in a very bad place, okay? Their real estate market has fallen off 50% just in the last couple of months.

00:33:57 - Conrad Jackson
Their stock market is.

00:33:58 - Mike Mills
They shut their stock market off, where you can't trade right now because their stock market is falling through the floor.

00:34:04 - Mike Mills
Okay?

00:34:05 - Mike Mills
They are in a world of shit.

00:34:07 - Mike Mills
All right?

00:34:07 - Mike Mills
They've got problems. Their population is on dramatic decline because of their one child policy that they had. Everything is falling off a cliff for them. They're not doing well. Now, the good and bad of that is. The good of that is that's not a big concern because they got bigger problems to worry about internally than going to try and get Taiwan.

00:34:27 - Mike Mills
Sure.

00:34:27 - Mike Mills
The bad part about that is when people get desperate and things start going south, they start doing stupid stuff.

00:34:32 - Mike Mills
Right?

00:34:34 - Mike Mills
Again, I don't know. But what I will tell you is that that's the least of my worries, because I can't control that shit at all.

00:34:41 - Conrad Jackson
But you also have to be kind.

00:34:43 - Mike Mills
Of tapped in a little bit. You got to know you're like, all.

00:34:46 - Conrad Jackson
Right, wait, hold on. What's going on? And then you see the government's like, all right, we're going to spend I don't know how many billions in trying to have this company into.

00:34:53 - Mike Mills
That's why Nvidia's launched the way they have, because we invested in them.

00:34:57 - Conrad Jackson
We need to make chips here so.

00:34:58 - Mike Mills
That we're not, which I'm on board with, like, let's go with it, too.

00:35:01 - Mike Mills
Let's do it.

00:35:01 - Mike Mills
Let's do it.

00:35:02 - Conrad Jackson
That's where things are hilarious that we've got to this point where it's like, all right, so these guys have been making these chips for how long? Y'all didn't see this coming?

00:35:10 - Mike Mills
Hey, man, it's like the pandemic, right? Everything shuts down and all of a sudden we can't get medicine. And we're like, wait a minute, so you're telling me that we're relying on China to ship us all of our pharmaceuticals because they make them over there? Because it's slave labor, basically. And then we're like, oh, we didn't see that coming. Okay, and now I have to figure that out. It's all a mess, man.

00:35:30 - Conrad Jackson
It is. All right, I got us off topic.

00:35:32 - Mike Mills
And that goes back to controlling what you can control, right? Because that's one thing. That's where I got off the politics porn is I used to be. Oh, man.

00:35:41 - Mike Mills
Oh, dude.

00:35:42 - Mike Mills
You want to talk to me about what's happening? I would know. I would be on. And I got all kinds of opinions. And then I was like, what the hell can I do about it? Yeah, nothing. Like, literally nothing. So that goes back to not being in a negative mindset all the time. Because if you watch that shit every day, you're going to be in a bad spot.

00:35:57 - Conrad Jackson
You're locked in.

00:35:58 - Mike Mills
Yes, you're going to be bad. But back to rates. So interest rates right now are like, the average rate is about 7%. That's where it is on average. That's where they're sitting currently. Where are they going to go? Well, there was a big sentiment in the market because back in end of fourth quarter, the Fed came out when they had their last meeting of the year, and they told everybody they were going to start cutting rates this year.

00:36:25 - Mike Mills
Okay?

00:36:26 - Mike Mills
They told them that. Why did they tell us that? Because they never said that. They'd never said that they were up until when the inflation was there. They said they were going to raise rates. But even as they were continually raising rates, they would never say the previous meeting that next meeting, we're definitely raising rates. Or next meeting we're definitely pausing. Or next meeting we're definitely cutting rates. Never said that. Now all of a sudden they're going, yeah, we're going to cut rates next year.

00:36:49 - Mike Mills
Yeah. Okay.

00:36:50 - Mike Mills
I mean, good. But I thought the economy was like killing it. Thought we were booming. Why would you cut rates if the economy is doing great, right? Or do they know something that we don't know or that they're not telling us?

00:37:02 - Mike Mills
Right?

00:37:02 - Conrad Jackson
Probably a little bit of both.

00:37:04 - Mike Mills
Yes.

00:37:06 - Mike Mills
It's a combination of incompetence and deception. The expectation was at the start of this year that we would see rates get down, that they thought the Fed said they were going to cut rates three times. That's what they said. But the market gets excited when they say they're going to cut rates. And there's a thing called the CME watch tools. It's basically like picking ods on what the Fed's going to do.

00:37:32 - Mike Mills
All right.

00:37:33 - Mike Mills
And it plans it out for the year and tells you how many cuts. Well, at that time, the market thought that they said the rate was going to get cut six times this year. Right. And it was going to happen at the first cut, was going to happen in March. 90% chance that it was going to happen in March and maybe even happen in the last meeting, which was in February, the first part of February. So that's what the market expectation was. All right, well, then we get a jobs report that looks like everybody in the planet's got a great job and everything's humming along. The GDP was up like three and a half or 6%, which is like, again, economy is just killing it.

00:38:13 - Mike Mills
Right.

00:38:15 - Mike Mills
And so everybody's going, well, wait a minute. If the economy is doing so great, Fed's not going to cut rates. So they come in February and they say we're not cutting rates in March. They basically told them, didn't quite say that, but they basically did or no. They said that we're still evaluating and it's not the time. And then the expectation of the rate cut went from 90% in March to like 30. Now it's at 30 ods change.

00:38:36 - Mike Mills
Yes.

00:38:36 - Mike Mills
And anybody that pays attention to it, the likelihood that they're going to cut rates in March is very slim. It's just not going to happen. The most likely scenario right now is May and June somewhere in there. Okay. But again, the market's doing awesome and our economy is doing great. Why are we cutting rates? Because you cut rates in times of recession. Well, let's look at the jobs report. Right, jobs report. They came out and said that we added 400,000 jobs to the economy. Like 385.

00:39:00 - Mike Mills
Yeah.

00:39:00 - Mike Mills
But it was like 100,000 more than the expectation. So I think I've told you before, it's like that commercial from career builder with all the chimpanzees in the office and they're all like, high five and celebrating, having a great time because the chart shows, like, going up and the one human in the room comes over and flips the chart. This is how it's supposed to be and it's going down. And they're like, what the hell? So it's bullshit is basically what I'm.

00:39:25 - Conrad Jackson
Saying to put that commercial in the comments.

00:39:27 - Mike Mills
I love it. It's my favorite one. I bring it up all. I talk about it too much. They do this thing at this time of year for January where they call, they make seasonal adjustments.

00:39:39 - Mike Mills
Okay.

00:39:40 - Mike Mills
And what these seasonal adjustments are basically is they're saying that if at other times throughout the year, in order to balance out, like, birth death rates at this time, and it's very complicated, of course. So they can't make it simple as to tell you why they do this.

00:39:53 - Conrad Jackson
Nobody regular would be able to understand.

00:39:55 - Mike Mills
No, they don't. So they don't really go in because I looked like, I was like, let me explain these seasonal adjustments to me. I really want to understand what the hell they're talking about. And it's pretty tough. So they showed that we added, like I said, 350,000 jobs or jobs to the market in January.

00:40:15 - Mike Mills
Okay.

00:40:15 - Mike Mills
Which is double the expectation, which was 180. All right. And they revised up previous jobs reports by 120,000 from previous months.

00:40:24 - Mike Mills
Okay.

00:40:26 - Mike Mills
So this seasonal adjustment. So the raw figure on jobs that were, like, the actual number that jobs, we lost 2.63 million jobs, we actually lost two point. That was the actual number.

00:40:39 - Mike Mills
Okay.

00:40:40 - Mike Mills
But they revised it up because of the seasonal adjustments to 2.98 million added, which put us to the positive of $350,000.

00:40:48 - Conrad Jackson
They graded us on a curve.

00:40:50 - Mike Mills
Yes.

00:40:50 - Mike Mills
Graded you on a curve on adding jobs.

00:40:52 - Mike Mills
Okay.

00:40:53 - Mike Mills
Good job.

00:40:53 - Conrad Jackson
To that one person that studied.

00:40:54 - Mike Mills
Yes.

00:40:55 - Mike Mills
So they actually took the average hourly earnings, too. And that said that those went up, that our average earnings went up. What they didn't kind of parse out on that was that the average hours worked dropped.

00:41:10 - Mike Mills
Okay.

00:41:11 - Mike Mills
But the average per hour earned went up slightly.

00:41:15 - Conrad Jackson
Amen. It's all about perspective.

00:41:17 - Mike Mills
So it's like people were changing jobs and getting. They went from making $12 an hour to making $13 an hour. But instead of working 40 hours a week, they were working 30. So their income either stayed the same or went down maybe a little bit, but their average hour per earning went up.

00:41:34 - Conrad Jackson
Or maybe they just let go of a third of the staff and paid the guys who stayed a little bit more money.

00:41:40 - Mike Mills
Well, and that's the thing is I saw something today. They were talking about continuing jobless claims. Basically, right now, if you lose your job, it is very hard to get another job.

00:41:49 - Mike Mills
Yeah.

00:41:50 - Mike Mills
Now you can go work at Doordash. You can go work at Sonic, you can go work at all the service stuff. And by the way, if you want to get job work for the government, you want to know who the biggest employer for the job gains were?

00:42:02 - Mike Mills
Who's that?

00:42:03 - Mike Mills
The federal government.

00:42:05 - Conrad Jackson
Absolutely.

00:42:06 - Mike Mills
Second was healthcare.

00:42:07 - Mike Mills
Okay.

00:42:07 - Mike Mills
And third was services. Services, hospitality, being like restaurants, fast food, all that kind of stuff. And the biggest gain in jobs was not full time jobs. Full time jobs were lost.

00:42:19 - Mike Mills
It was part time jobs for sure. Absolutely.

00:42:22 - Mike Mills
Jobs are up, but people are working part time. They're working two jobs, they're making less money, and if they get laid off from their good job, I can't get another one.

00:42:31 - Mike Mills
Yeah.

00:42:32 - Conrad Jackson
While the price of groceries, groceries continues to go up.

00:42:37 - Mike Mills
And the biggest sector that's getting hammered by job losses right now is the tech sector. Yeah, and why is that? We just talked about it.

00:42:46 - Conrad Jackson
Yeah, man. Because ultimately, for me.

00:42:49 - Mike Mills
Well, why are all those people losing their jobs? If you're a software programmer, if you're any kind of, you got your four year degree CPA, why are you losing your job right now, man?

00:43:01 - Conrad Jackson
I feel like, because, number one, you're costing the company a ton of money at your high income, correct position.

00:43:09 - Mike Mills
And what's their alternative?

00:43:10 - Conrad Jackson
Go somewhere else and go overseas?

00:43:12 - Mike Mills
No. What is the company's alternative?

00:43:14 - Conrad Jackson
Oh, yeah, let you go.

00:43:15 - Mike Mills
And how do they replace you?

00:43:17 - Conrad Jackson
They get somebody farmed out or something like that. Or AI.

00:43:20 - Mike Mills
There you go.

00:43:21 - Conrad Jackson
There you go.

00:43:21 - Mike Mills
There you go. That's it.

00:43:24 - Mike Mills
So when AI first came out, everybody was worried about them taking trucker jobs. And all these blue collar, they have decimated the white collar. When you look at companies like Facebook, they've laid off thousands and thousands of people and have cut their cost dramatically, which is why their cost per share has gone up.

00:43:40 - Conrad Jackson
It was like either nine or 19,000 people that Facebook had laid off last year.

00:43:46 - Mike Mills
It's more than that.

00:43:47 - Mike Mills
Really?

00:43:47 - Mike Mills
Yes, and it keeps growing every single day. Because they overhired during the pandemic, because they had so much traffic to the sites, because people were staying at home and so they brought in a bunch of people to help manage all this. And then now with the advent of AI and being able to, I mean, because it's rapidly grown, so now they're bringing in these chat bots and these different software bots that can do most of what they need to do and they're laying off all those people.

00:44:09 - Conrad Jackson
It's crazy.

00:44:10 - Mike Mills
It's crazy. So why is this important to real estate? Okay, what does this have to do with anything? Well, it has to do with the fact that if you look at just the base numbers right now, it seems like the economy is just blowing and going okay, it looks amazing, but the underlying stuff is telling us that it's not as good as you think.

00:44:28 - Conrad Jackson
That's a different story.

00:44:29 - Mike Mills
That's a different story. And the reason why the Fed is telling us that they're going to start cutting rates this year is because regardless of what they say about a soft landing, they feel like that the market is going to take a shift and going to take a turn, whether it be, if you look at commercial real estate right now, which is really sucking wind, right? Because people cannot get those reset on those loans that they had before and they're not paying them, and small banks are going to be struggling on that very quickly. So you're going to see an influx of that. You do have a large segment of the population that's getting laid off from their employment. So this sounds like bad, like, oh, Mike, you told us earlier not to get into the bad stuff and gloom.

00:45:05 - Conrad Jackson
Here it is.

00:45:05 - Mike Mills
Here it is.

00:45:06 - Mike Mills
Okay, but why is this good? Well, this is good because this is good for interest rates, okay? Because when the economy starts to suffer, the way that the Fed adjusts and tries to get it back on the uptick is they lower rates because if they put money into the economy and drive commerce, then that will improve things. That's the idea, right? It becomes cheaper to borrow money, more people will do stuff. Not to mention the federal government can't keep paying 6% rates on their money because we're at something like 20 trillion in debt. So that's a whole lot of things.

00:45:36 - Conrad Jackson
Luckily, the debt, majority of it is on fixed rate as opposed to.

00:45:42 - Mike Mills
But they're short term fixed rates.

00:45:43 - Mike Mills
That's true.

00:45:44 - Mike Mills
So they turn over the t bills turn over every 5710 years whenever you issue them. So then in order to get more debt bought, which is why we're actually bringing our debt load down, because they don't have a market to buy those. So as rates start to come down. All the people right now that we talked about in the beginning that you were talking to that were saying, I'm waiting to see where rates are going to go, or the builder is giving me a better buy down rate or whatever the case may be, as you start to see that tick down, which we've already seen, because your business has picked up, my business has picked up everybody. If you're watching this and you're a realtor in the market, your business has started to grow. Right. Well, as that happens, more people get into the market.

00:46:22 - Mike Mills
Right.

00:46:23 - Mike Mills
And last year was our worst year in real estate that we've had in 30 years. Something like that. And did home prices go down? No, they went up.

00:46:33 - Conrad Jackson
Sure didn't.

00:46:34 - Mike Mills
And in this area, they went up like 6%.

00:46:36 - Mike Mills
Yeah. Okay.

00:46:37 - Mike Mills
So if that's the case, if we had our worst time in the history of the country in real estate, right, when rates were at 8% for a good chunk of the time.

00:46:44 - Mike Mills
All right.

00:46:45 - Mike Mills
And now we're moving into an environment where rates are starting to come down and we still don't have enough inventory because we don't, then what is that going to do to home prices?

00:46:54 - Conrad Jackson
Yeah, man. It's going to shoot them up some more. I mean, ultimately, people are going to jump back in and they're going to be confident because they're solely looking on the rate. Whether you ignore the economy or what's going on, they're going to look at that rate and rates are down. Is coming to buy.

00:47:06 - Mike Mills
Yes.

00:47:07 - Mike Mills
Well, because it's not down for everybody, by the way, and good or bad or whatever, this is just the truth. When the economy takes a dip and goes south, it affects more people on the lower end of the economic scale than it does on the higher end.

00:47:21 - Mike Mills
Okay?

00:47:21 - Mike Mills
And again, good, bad or otherwise, right now, most homeowners, people that can buy a home because home prices are insanely high, are economically secure in most cases.

00:47:34 - Conrad Jackson
Which is why you see one of the reasons why you see most of the home builders building closer to the median price point as opposed to the lowest price point. You're going to have half a million be kind of your starter for most of these neighborhoods close to it. You know what I mean? Because that's people who have the equity, who have the money, that are more stable and the ones that are able to afford to buy these homes, and that's where they can get the most bang for their buck on the profit.

00:48:03 - Mike Mills
Yeah.

00:48:03 - Mike Mills
And the builders are offering tons of incentives, which, by the way, look, this is a jealous girlfriend kind of a thing, because builders beat us often because of all the stuff that they're throwing money. Look, when people are throwing cash at you, it's like, what is that indecent proposal with Demi Moore? She's rolling around on the bed with all the cash. That's why I feel like borrowers that show up to builders.

00:48:25 - Mike Mills
That's what it is.

00:48:25 - Mike Mills
Like, they have a bed and they're just pouring cash on it. Like, you like this, right?

00:48:29 - Conrad Jackson
You like.

00:48:31 - Mike Mills
And you could tell me if I'm wrong on this.

00:48:33 - Mike Mills
This is how I feel about it.

00:48:35 - Mike Mills
Do what you got to do to get into a house. Number one, whatever you got to do. Number two, though, when it comes to builders, you're not getting that money for free, okay? There's always a cost. And builders build comps on houses that they sell in their neighborhoods.

00:48:48 - Mike Mills
Okay?

00:48:49 - Mike Mills
So when they get a couple of homes sold and establish a comp level, then the other homes can get priced out. But if you were going to buy that same house in a different neighborhood with the same footprint and everything else, you're probably paying 20% more for that house than you are otherwise, which is fine if the plan is that you're going to be there for a while.

00:49:08 - Mike Mills
Right? Okay.

00:49:08 - Mike Mills
But I'm telling you right now, if you buy a new build today or yesterday or a month ago, and then something happens, you get a job change, you have something go down, and then you have to sell that property within a year or two, you have a really hard time getting your money back on that deal.

00:49:22 - Mike Mills
Yeah.

00:49:23 - Conrad Jackson
And I tell people, man, it's like, you got to really assess your situation. You can't just go in here blind because it looks good, it's nice, it's new, and it feels good. You got to assess your situation. What's a long term goal for anybody who does? We do try to help with new construction. We try to make sure that they understand these are the risks also with new construction. So if you're going to take this on, make sure you plan on being here. I'm telling folks, you guys stay here at least three to five years.

00:49:50 - Mike Mills
Yes.

00:49:50 - Conrad Jackson
Don't do call me before then. If you do, just know that there's a chance that you might not get your money back.

00:49:55 - Mike Mills
Yeah.

00:49:57 - Mike Mills
Because those incentives are built into the price in many ways, right?

00:50:00 - Conrad Jackson
That's right.

00:50:00 - Mike Mills
And even the rate buy downs, that's another thing I always warn people to watch on. That is because there are two types of buy downs, and I've done videos on these. Plenty of times there's permanent buy downs and temporary buy downs.

00:50:09 - Conrad Jackson
We'll put those in the comments also.

00:50:10 - Mike Mills
Yes.

00:50:10 - Mike Mills
So if you go to a builder and they're offering 4.99% when everybody else is at seven, that's probably a temporary buy down, most likely. Now, if they're offering six, sometimes they'll pay enough to get that to where it's a permanent. But ask the question, because unfortunately, a lot of which is why it's important when you go to a builder to go with a realtor. Number one absolutely is when you go to visit a builder, you need to go with your realtor because there are questions that they're going to ask that you're not going to think of asking because you're going to walk in, this is human nature. You're going to walk in the builder, you're going to see the house, you're going to be like, oh, my gosh, I love that. I love that. I love this. Especially when you go into the spec homes because they got it designed and looking sharp.

00:50:47 - Mike Mills
Right?

00:50:48 - Mike Mills
Love this house. It's great. They give me the price, which you're not really thinking about. I want to know my payment. What's my payment?

00:50:54 - Mike Mills
Right.

00:50:54 - Mike Mills
Well, the insurance is low because you got a brand new roof, so your insurance is going to be a little bit less. If the builder is good, they'll at least tell you, hey, here's the payment with the taxes and what they're going to be in a year or two.

00:51:06 - Conrad Jackson
Not what they are now.

00:51:07 - Mike Mills
Not what they are now. Because if they tell you what the price on the taxes are right now, you're going to be like, oh, my gosh, this is unbelievable.

00:51:13 - Conrad Jackson
I can afford that.

00:51:14 - Mike Mills
I can easily afford that. And then you call Mike after a year of owning the house, when you have it built, you're like, why do my taxes go up $700 because of unimproved taxes. So watch out for that. And then they give you the rate at 4.99 and say that your payment is this. And again, this is human nature. You heard everything that you wanted to hear. You saw the best house. Yeah, the price sounded a lot. But when you saw the payment, you're like, oh, I can easily do that.

00:51:43 - Mike Mills
Right.

00:51:44 - Mike Mills
What you don't think about or realize or contemplate is that your taxes are going to go up. Insurance is going to go up. If you got a temporary buy down, your rate is going to go up.

00:51:53 - Mike Mills
Right.

00:51:54 - Mike Mills
And all of those things are going to come into play. So again, take a realtor with you to help you navigate this stuff. If it makes sense and the deal makes sense, go for it. Because you can save you a lot of cash because they're giving you ten or 15 grand, and they say, we're going to give you a fridge, they're going to give you a dishwasher. I thought the house usually comes.

00:52:16 - Conrad Jackson
You're talking to a builder, too. I am a builder. So I understand the price points, the profit margins, the markups. I understand all of this. And I try to tell folks, it's like, man, you got to go in there with your agent because not even just before you even get to the rate and the payment and all this talk about the price of the house. Yes. And all the things that they're going to throw at you. Hey, you can take x amount of dollars, or we'll just give you this flooring, which is this much. Give you this, which is this much.

00:52:47 - Mike Mills
We'll give you this.

00:52:47 - Conrad Jackson
It's ten grand. Five grand here. And I'm going in telling folks, don't get that.

00:52:52 - Mike Mills
No, take the cash.

00:52:52 - Mike Mills
Take that cash. Yeah.

00:52:53 - Mike Mills
That's $2,500. I can do that for dollar benefit.

00:52:56 - Conrad Jackson
Yeah, they're probably going to give you that in that amount, but they're going to charge you two and a half times more to put that same flooring down that somebody else could come in, do after the fact. Picking a lot exterior on the end, cul de sac corner, lot bigger lot tree lot backs up to a creek. And then you're paying a lot premium for it, which is 1015, 20 grand on top. They don't tell you that lot premium is literally just money that you're paying extra to be there.

00:53:28 - Mike Mills
Right. That's it.

00:53:29 - Conrad Jackson
There's no value other than that. And who determines that? The builder?

00:53:34 - Mike Mills
Yeah.

00:53:36 - Conrad Jackson
What's it worth to me? What do I think it's worth? We'll charge you 20 something for this. We'll charge you 50 for this. That's just extra money on top. Like, why am I taking that when I know that? Okay, well, if this isn't my forever home, maybe I can take an interior lot with little to no lot premium so I don't have to pay just extra money out of my pocket on top of the price and have that property appraised. And now I need the rate buy down in order to make sure that the sucker is going to qualify the first year to get me through my close. It doesn't make any sense. You're stretching too hard for that stuff. Just get what's given and then turn around and take the money.

00:54:09 - Mike Mills
Well, and by the way, since you said forever home, if you're under the age of 50, it's probably not going to be your forever home. Just so you know.

00:54:19 - Mike Mills
Right.

00:54:19 - Mike Mills
If you're under the age of 50, the likelihood that's actually going to be your forever home is slim to none.

00:54:25 - Mike Mills
All right.

00:54:25 - Mike Mills
Because especially if you have kids or you don't have kids, especially, life changes a lot these days.

00:54:32 - Conrad Jackson
Job transfers, different situations. Hey, people just don't want to own sometimes, and they just want to get out and take some cash and just sit tight and see what's going on. There's different reasons. You didn't have to be like, hey, I'm not in a family situation, so I'm not going to move. No, your job could be shipped out. You could be working from home or get a different offer where you could work from home and you're like, all right, I don't really want to be here all the time. Yeah, maybe I should get something smaller.

00:54:55 - Mike Mills
Well, and at the end of the day, this all goes back to, and I knew we'd go off on a bunch of different. It just because I had a bunch of stuff on here, too. But this all goes back to when we talk about, very back to beginning of the buy the house, state the rate crap, look, which.

00:55:09 - Conrad Jackson
We'll put those videos in the.

00:55:10 - Mike Mills
Yes, we'll put those there, too.

00:55:11 - Conrad Jackson
I'll find some.

00:55:12 - Mike Mills
But buying real estate, and I never use superlatives or absolutes and say it's always. But, man, it's really tough not to.

00:55:23 - Conrad Jackson
It's hard.

00:55:24 - Mike Mills
When you talk about real estate, it's really hard not to say it's always a good investment if given enough time, right? Yeah, given enough time, it's buy real.

00:55:32 - Conrad Jackson
Estate and wait and wait.

00:55:35 - Mike Mills
Well, because like you said, I have 50% equity in my house that I bought in 2000. And when was that? We've been there seven. It's like 2017, I think is when we bought it. 2016. I have over 50% equity in my house tomorrow if I want to sell it. And you could say, well, that was the greatest time in the history of the world in real estate, blah, blah, blah. It's true. That's absolutely true. Is that guaranteed to happen again? No, certainly not. But you go back far enough, and we have plenty of periods of time where those things happen where you had.

00:56:06 - Conrad Jackson
Surges that shot people's appreciation up. Absolutely.

00:56:09 - Mike Mills
And even still, even the times where you didn't get 20% equity or 20% appreciation, you're getting three, you're getting five, you're getting tax deduction. The expense, which is the biggest expense for you living in your life, is living in your residence, whatever that is. That is something that is at least. Yeah, you're paying a lot of interest.

00:56:29 - Mike Mills
Okay?

00:56:29 - Mike Mills
For sure. It's a 30 year loan. There's a lot of interest in that thing.

00:56:32 - Mike Mills
All right?

00:56:33 - Mike Mills
There's ways to mitigate that, too. But at least you're not paying someone else's mortgage.

00:56:38 - Mike Mills
Exactly. Okay.

00:56:38 - Mike Mills
Because when you'renting, you are paying someone else's mortgage. Everybody that rents from. No hate on you, Conrad. But everybody that's renting for Conrad is paying.

00:56:48 - Mike Mills
Is. It is.

00:56:49 - Conrad Jackson
And that's why it's like, all right, well, over time, this is going to be solid for me. Like, to me, rental real estate, when I'm looking at it, that's magic to me. Okay, I can purchase the house, never live in it, have somebody pay the mortgage off, and at the same time, the value is going up. To me, it's magic.

00:57:09 - Mike Mills
It has no expense to you. It's a massive tax deduction. And in ten or 20 years or 30 years, whenever you decide to hang it up, you could sell that thing, or you could sell it when you get it paid off and get more cash and go buy more real estate. I mean, there's just so many things that you can do with it that for the person with money that doesn't want to invest in stocks, they just want to have it be basic. I want to have my 401. I don't want to play around in crypto or buy and sell trading.

00:57:37 - Conrad Jackson
Spend 20,000 for an NFT doing all that crap.

00:57:40 - Mike Mills
Like, you don't want to mess with it.

00:57:41 - Mike Mills
I get it. Right?

00:57:43 - Mike Mills
Buy homes. That's the best place to put your money.

00:57:46 - Conrad Jackson
That's right.

00:57:46 - Mike Mills
And the rates are going to change. They're going to go up. They're going to go down. You can't predict it. You don't know where it's going to head. Now you have to make a decision. You can't put yourself in an unaffordable situation where you're buying a house that you just can't afford. Don't do something stupid.

00:58:02 - Mike Mills
No. Right.

00:58:03 - Mike Mills
But if you're stretching a little bit, I mean, when you bought your first house, could you afford it maybe based on what you knew? Barely, same thing.

00:58:11 - Conrad Jackson
Barely.

00:58:11 - Mike Mills
Barely.

00:58:12 - Mike Mills
Right.

00:58:12 - Mike Mills
I can make it work. But it's like, man, how am I.

00:58:14 - Mike Mills
Going to do this? Yeah.

00:58:15 - Mike Mills
And then when I bought my second house, I was like, damn, how am I going to do this right? And then you get to third and fourth, you're like, okay, well, every single time, I've always been like, damn, how am I going to do this right?

00:58:24 - Mike Mills
Yeah.

00:58:24 - Mike Mills
I'm not saying. Because there was a whole thing back in, what was it, eight? Where they were like, oh, you'll figure it out. You'll make more money one day. It'll be fine. I'm not saying that. I'm just saying if you have to stretch a little bit beyond where your comfort zone is, it's going to be okay.

00:58:36 - Conrad Jackson
Yeah. When you're in real estate, man, real estate will give you some jewels to take over the long term. Just the main thing that most people forget is time. Time is one of the most important parts of that equation. If you can wait in that time when you're buying this real estate, it.

00:58:52 - Mike Mills
Will pay you back. Yeah.

00:58:53 - Conrad Jackson
And some.

00:58:54 - Mike Mills
And the point of this entire conversation that Conrad and I had today was simply to say to you that if you are out there selling homes, if you're helping buyers and sellers, you're a real estate agent and you're out there doing the Lord's work every day. Okay, then preaching the gospel.

00:59:09 - Mike Mills
Yes.

00:59:09 - Mike Mills
Then you need to understand this stuff.

00:59:12 - Mike Mills
Okay?

00:59:12 - Mike Mills
Because all of the agents, the 60,000 agents or 100,000 agents that left the business last year, they don't understand these things. They don't understand why the rates go down. They don't understand what impact that has on the pricing. They don't understand that, although there can be short time horizons where real estate values decline, you only take a loss when you sell. So if you're having to sell when the market's down, yeah. You're going to be in a bad spot.

00:59:34 - Mike Mills
Absolutely.

00:59:35 - Mike Mills
But if not, you can wait it out. You can persevere. It's going to make up in the long term.

00:59:40 - Conrad Jackson
And just, look, a lot of people, we're creatures of habit, right?

00:59:43 - Mike Mills
Sure.

00:59:44 - Conrad Jackson
We go home the same way, we do everything the same. We kick it around the same people, we go to the same places, we did the same restaurants.

00:59:49 - Mike Mills
Right.

00:59:50 - Conrad Jackson
But when you're out in your day, just out on the roads, look around, you notice there's dirt moving. There's big construction trucks and concrete being poured. And what are they building?

01:00:02 - Mike Mills
Property.

01:00:03 - Conrad Jackson
Building buildings. Building assets. Somebody's spending millions of dollars to build your grocery stores or your restaurants, your warehouses. Okay, well, if it cost millions upon millions to build those, why are they doing that?

01:00:17 - Mike Mills
Yes.

01:00:18 - Conrad Jackson
Because they believe that that sucker is going to be an asset long term.

01:00:21 - Mike Mills
Yeah.

01:00:21 - Mike Mills
Well, this is a great example. So, you know drive nation, right. So drive nation is started by Jermaine O'Neill, who used to play NBA for Mike Mills Mortgage and Finance. He started drive nation, which is. They do volleyball and basketball. I know it because I'm there for volleyball all the time, and I'm sure you're there for basketball.

01:00:39 - Conrad Jackson
Basketball.

01:00:40 - Mike Mills
So how much do you think that.

01:00:41 - Conrad Jackson
Facility costs to build, man? I want to say 7 million.

01:00:46 - Mike Mills
I think I looked it up.

01:00:47 - Mike Mills
Okay.

01:00:47 - Conrad Jackson
Back in, maybe that was projected when they were doing the development.

01:00:53 - Mike Mills
So let's say it was seven to 10 million.

01:00:54 - Mike Mills
Yeah.

01:00:55 - Mike Mills
Right. The building right now is probably worth 20, would you say? Okay, so Jermaine O'Neill, not him, but him and his group go in. They build a seven to $10 million facility over on this property by the airport. It's massive. It's awesome. It's nice. It's wonderful. What did they not own?

01:01:14 - Conrad Jackson
The dirt.

01:01:15 - Mike Mills
The dirt. They did not own the dirt. They had a lease. They had a 30 year lease on that dirt.

01:01:23 - Mike Mills
And then last year, the airport, which.

01:01:26 - Mike Mills
Is its own little city.

01:01:28 - Mike Mills
What they do.

01:01:29 - Conrad Jackson
Man, I didn't hear about that.

01:01:31 - Mike Mills
They came in and said, we're canceling your.

01:01:34 - Mike Mills
Yes.

01:01:35 - Conrad Jackson
I didn't hear about that.

01:01:36 - Mike Mills
Yes.

01:01:37 - Conrad Jackson
I didn't know that.

01:01:38 - Mike Mills
This year's the last year for drive nation.

01:01:43 - Conrad Jackson
That hurts. Such a popular place.

01:01:46 - Mike Mills
Yes.

01:01:47 - Mike Mills
Now, this is my most latest news, so if I'm wrong and that's changed, please let me know, but put that.

01:01:54 - Conrad Jackson
In the comments also.

01:01:55 - Mike Mills
Yes.

01:01:56 - Conrad Jackson
I didn't know that.

01:01:57 - Mike Mills
Yes. Wow. Yeah.

01:02:00 - Mike Mills
So they did not own the dirt. Own the dirt. If I have to leave you with anything on this, don't build a $7 million business.

01:02:08 - Mike Mills
Yes.

01:02:08 - Mike Mills
And not own the dirt below. Don't rent the dirt.

01:02:11 - Mike Mills
Own the dirt.

01:02:12 - Mike Mills
Don't build a business if you don't own the land. Don't open a company if you don't own the land. And there's a reason behind that. So to say that putting your money into real estate is a bad investment under any circumstances to me, is completely ignorant.

01:02:26 - Conrad Jackson
Oh, man, that hurts. Now I got to go look that up.

01:02:29 - Mike Mills
Yes.

01:02:31 - Mike Mills
Now it's brutal. All right, well, we're an hour. We could talk for 7 hours. This could go on forever, and eventually people are going to get sick.

01:02:39 - Conrad Jackson
I wonder if that's why our second graders aren't playing at drive nation this weekend. They were supposed to.

01:02:43 - Mike Mills
Well, I mean, we just played there a couple of weekends ago, so it's still functioning or whatever, but from what I understand, this is it. This is the last year. So all that to say, buy real estate as Mark Twain said, because they're not making any more of it. And wait and wait and tell your clients this. Help them understand. Don't tell them to date the rate. Just explain to them how interest rates work and what they do and how real estate works. And the bottom line of real estate is that it always goes up.

01:03:12 - Conrad Jackson
I'm going to find like 15 of those date the rate videos and post them in the comments right after each other.

01:03:20 - Mike Mills
Yes.

01:03:22 - Mike Mills
Don't buy the home.

01:03:23 - Conrad Jackson
If you was out there doing those, I'm going to find you and I'm going to put it in the comments.

01:03:27 - Mike Mills
I think I even said when they were coming out, I made a video a while back where I was like, look, I hate this statement because I just hate cliched statements that they drive me crazy. Even at the time, it wasn't necessarily that I disagreed with the sentiment of it. It was just like, I just hate.

01:03:41 - Conrad Jackson
We don't find you.

01:03:45 - Mike Mills
No offense anybody says this, but I don't like living the dream. When I ask somebody like, what are you doing? Living the dream?

01:03:49 - Mike Mills
Okay.

01:03:50 - Mike Mills
Everybody says that.

01:03:51 - Conrad Jackson
All right, enough.

01:03:52 - Mike Mills
Yeah.

01:03:55 - Mike Mills
All right. That's you.

01:03:56 - Conrad Jackson
You've been warned.

01:03:57 - Mike Mills
That's it.

01:03:58 - Mike Mills
Don't tell me you've been living the dream. We're all living the dream, man. We're all living the dream. All right, guys, everybody have a great weekend. Sorry that we rambled on talking about mavericks and all kinds of other weird stuff today and the economy in China and chips and rates and my voice I was coughing on every five minutes. But hopefully it was entertaining because that's ultimately the goal. So there you go. We'll be back to our regular scheduled program next weekend. I've got a market update on Tuesday. We're all actually, did you listen to my last one? I told my first home loan did. So if you haven't listened to part of it. Okay, so if you haven't heard that one, go back and listen to it. Little twist at the end. So check that out. I'll have an actual market update next week where we talk about some stories. I've got a bunch of big things with more investment. I can't use words right now. More institutional. Sorry, on that date, the rail slogan, more institutional buyers coming into the market. I got some more stats on housing that I'll go through. And then on Thursday next week, I'll do another live with a home inspector, Nathan Ross. He's with siteguard inspection. He's going to be talking about what to look for for home inspections, what you need to pay attention to, how to talk to your buyers about them.

01:05:08 - Conrad Jackson
I'll be chimed in on that.

01:05:09 - Mike Mills
And then also because we touched on this today, why it's so important to get inspections for new builds. So all that will be important. So tune in for that. And otherwise, I will see you guys.

01:05:20 - Mike Mills
On the flip side.

01:05:20 - Mike Mills
So everybody have a great week.

01:05:22 - Conrad Jackson
Adios.

01:05:22 - Mike Mills
Thanks, Conrad, as always. Budy. You'll be back. I'll be back.