California Association of Realtors Deputy Chief Economist, Jordan Levine, joins Bob on this episode of Property Management Brainstorm to talk about the economic outlook for the California real estate market. Jordan’s work for C.A.R. uses data to understand the market throughout the state of California. He not only shares what he has seen so far in 2019 but what the current economic outlook for real estate means for those considering investing in property. If you are interested in real estate investing or simply want to know more about the California market, you don’t want to miss this episode! For more information about C.A.R., click on this link to the C.A.R. Website. This episode is always available for listening, sharing, or download at Property Management Brainstorm.
Outline of This Episode
- [2:10] Who Jordan is and what he does
- [5:55] An update on Q1 of 2019
- [8:10] How consumer confidence and the real estate market are connected
- [12:45] The market explained by generation
- [14:08] Metrics for tracking homes sold per year
- [18:34] An exodus from California
- [22:58] How an economic recession affects real estate investing
- [26:48] The rental market in California
An update on Q1 for 2019
Jordan shares that Q1 of 2019 has been a wild ride - statewide, nationally, and globally. The markets are all over the map. Because of this, consumer confidence is all over the map. Consumer spending has dropped as well as rates. Jordan is fairly confident that this volatility that has been seen so far in the year will stay for the remainder. The question of how long can the economy actually hold up is the main question underlying consumer skepticism. Historically, you don’t see extensions that last 10 years or more and the current expansion is very close to that 40 quarter limit. Be sure to take all of this into account as Jordan shares more on the California real estate market in this episode!
How consumer confidence, economic outlook, and real estate are connected
Consumer confidence plays a more specific role in the real estate sector. Buying a home is one of the biggest purchases a person may make, so when the public begins to fear that the economy may tank, they are more reluctant to make big-ticket purchases. Jordan shares that in his research 3 out of 4 people are saying now is not a good time to buy a home. With a lack of confidence in the current economy, the demand for real estate goes down. Currently, Jordan is seeing houses being discounted and days on the market rising. This points to fewer people buying. There is still psychological scar tissue from the last economic downturn, causing the market to slow.
Why a yield curve inversion is important to note
A yield curve is looking at yields on different government bonds on different levels of maturity. Buying a bond is loaning the US government money, and the return is a function of the inherent risk. To tie up money for 30 years with a 30-year bond is more risk, so there are higher interest rates on this longer-term borrowing. Because loaning the government money for longer gives you more exposure to their bad choices, there should be a higher return for the risk. On the shorter end of the yield curve is a short term bond. There are typically a lot fewer question marks about what the next 3 months look like. Because the risk is lower, there is less compensation. HOWEVER, when the yield curve inverts, it tells you what people are thinking about the current economy. Shorter bonds are giving higher returns because there are fears on the shorter term and underlying risks in the short run in the economy. Because of this, a yield curve inversion is a good way to predict future recessions.
Bob Preston: 01:10 Welcome, welcome, welcome to the Property Management Brainstorm Podcast. I'm Bob Preston, your host of the show, broadcasting from our studio at North County Property Group in Del Mar, California. I'm really excited about our show today because we will be discussing the economic outlook for the California real estate market and what this means for possibly investing in property in 2019. I have with me today by telephone from central California, Atascadero to be precise, Jordan Levine, who is the Deputy Chief Economist at the California Association of Realtors, otherwise known as C.A.R. And that's how I'll refer to it today. And Jordan, thank you for joining us. This is awesome.
Jordan Levine: 01:50 Bob. Thanks so much for having me. I'm excited to be here.
Bob Preston: 01:54 Great. In preparation for today, I did review your bio on LinkedIn. Really, really impressive. And I'm hoping you can start the show today just by sharing your background, what you do for C.A.R. and your areas of responsibility as the deputy chief economist.
Jordan Levine: 02:09 Yeah, definitely. I'm uh, started my career as a data nerd. I went to school at UCSB and got a degree in Economics.
Bob Preston: 02:16 Me too, fellow Gaucho. Right. Nice.
Jordan Levine: 02:19 That’s right. Yeah. And then after that I went out and did some Grad studies out in England, kind of dual purposed it for it to get that education but also just to see a bit of the world. Then I came back and dove into economic consulting initially and doing stuff in intellectual property and litigation. Then I moved to a consulting company up in Los Angeles where you're focused on just macro forecasting, specifically focused on California and a huge part of California's economy is obviously our housing market. So, did that for about eight or nine years and that's how I kind of crossed paths with Leslie Appleton Young who’s my boss at C.A.R. um, doing some studies for them about property taxes and some other things in my kind of role as a consultant. And then that when the position came available at C.A.R., I kind of jumped at the chance because I really felt like I was going home. The real estate side of things was always my favorite thing to, to look at in terms of studying the economy as a consultant. And also just on a personal level. I mean, I grew up in east county, San Diego. My Dad was a realtor. He started as an appraiser and then he became a realtor and he started acquiring some investment properties, so.
Bob Preston: 03:27 So it's in your blood so to speak, the real estate market.
Jordan Levine: 03:29 Yeah, exactly. Now I feel like I'm, I'm kind of coming home because I'm able to kind of nerd out and use my data skills that I kind of went to school for, but also apply them to a market and a huge chunk of the economy that's both important and also personally kind of meaningful to me. And so here at C.A.R. and I've been here about three and a half years now. I'm basically in charge of rolling out all of our markets statistics and a monthly press release about what's happening with sales prices. I do a lot of talking to people in the real estate community about the economy and how that specifically impacts housing. I create a lot of products, so I'm trying to really level up our product stable at C.A.R. so that our members have, you know, all the information they need to go out there and crush it. Because as I'm sure you know, all of your listeners know every market is kind of unique and different and has its own kind of ins and outs that you need to know. And so my focus at C.A.R. over the last three years, it was really taking that stuff that we've done really well at the state and the county level for many years and really trying to drive that down to the local level, be it at city level or zip codes, and also expanding the kind of segmentation analysis that we do. So, looking at things at different price points, breaking things up by quintiles, and then also driving new indicators that can hopefully give us a better picture of where things are going in the future.
Bob Preston: 04:48 Wow. That is awesome. And super detailed stuff and you're right, I mean California must have a ton of different little real estate markets and segments because the diversity of the state.
Jordan Levine: 04:58 Yeah, it was one of my biggest lessons when I first started at C.A.R., you know we were rolling county level data for so many years and I would go out and present this county level data in places like San Diego and people who would come to my talks. I'll be like, yeah, that's great, but in Alpine, you know where I live, that's not the story. Or in La Jolla things look completely different. It really does provide kind of a lot of leveling up of the game if you're able to really see into your own little micro market, really understand the dynamics there and how it compares to what else is happening at a more macro level.
Bob Preston: 05:28 Absolutely, and for our listeners, this is old hat, this kind of podcast stuff for Jordan because he hosts his own podcast for C.A.R. called Housing Matters podcast. I'm going to ask about that a little bit later and you can tell the listeners where to find you and your podcast because it's great stuff. Well beyond the level of, we're going to be able to touch on this today. So, suffice it to say that, and I think you'll agree with this Q1 of 2019 from an economic perspective has been sort of a wild ride, right? And the first couple of weeks of April, there's been some interesting announcements and not just from a state perspective in California, but even, you know, nationally and globally. Am I right about that? Maybe you can share some of those insights.
Jordan Levine: 06:08 Yeah, definitely. I mean the markets, as I'm sure all of your listeners know who are active investors, you know the markets are all over the map. We've seen consumer confidence all over the map as kind of a result of that, right? It kind of goes the way that the markets go. And we've also seen things happen on the retail front with consumer spending. And that's the one that I'm most concerned about because really that's the number one driver of our economy at this point. But then, you know, we've got the Fed making announcements about kind of no moves and things like that. We've seen rates kind of dropped back down again after going up to 5% and so, you know, things are just kind of a little bit crazy out there. And unfortunately, you know, the one thing that I'm most confident in forecasting is that this kind of volatility that we're seeing is kind of a staple of the new environment that we're in.
Bob Preston: 06:57 You think that's just for 2019 or will it that sort of volatility continue beyond this year? I mean, I know you're, you don't have a crystal ball here, right?
Jordan Levine: 07:07 Yeah, exactly. Well, I think, you know, the question is how long can the economy hold up, right? Because, and I think that's kind of what underlies a lot of this skepticism and things moving all over the place and market's going down and back up and things like that is that, you know, in general if you look back historically you don't see expansions that last, you know, 10 years or more. And we're, you know, the recession officially ended back in 2019 during the second quarter. And so we're really coming close to that kind of 40 quarter long expansion that you just don't tend to see. And now, you know, although I always caution folks recessions don't just happen for no reason. This expansion is getting pretty long in the tooth.
Bob Preston: 07:46 Sure. It's interesting because I mean you sort of mentioned things that are occurring at the national and global level. I mean we've had the government shutdown this year that we've got a trade conflict with China. The stock market, as you've alluded to, has certainly been volatile. And then you also mentioned consumer confidence. I mean, what does consumer confidence and with all this volatility in the background have to do with the real estate market?
Jordan Levine: 08:10 Consumer confidence is a huge part of our economy in general. If you look at GDP growth, I think we grew by about two and a half percent last quarter. All of that was basically consumer spending, not a lot of business investment happening and things like that. And so to the extent that consumers pull back at some point, that hurts us just from a pure economic growth standpoint. Right. And so we know that GDP and unemployment are huge drivers and those all feed off of economic growth. And so, you know, if consumers stop spending, that's that kind of broader macro threat to housing. But it also, consumer confidence also plays a more specific role, I think in the housing sector, right? Because this is the number one purchase or the largest purchase that I think a lot of would be home buyers are going to ever make in their lifetime. They're having to stretch farther and farther to get those homes. And so, to the extent that they're worried about what's going to happen with home prices are if the economy's about to tank or if the stock markets in trouble, then they're more reluctant to kind of make those big-ticket purchases. And in fact, we're starting to see that in our survey research. So we're out there asking folks, do you think it's a good time to buy serving California? And specifically in what we've seen over the last nine months is that about three out of four are saying, no, it's not a good time to buy. And that's despite the fact that, again, all of those economic indicators I mentioned, low unemployment, growing economy, low rates are out there, but there's, you know, again, just kind of underscores how important that consumer confidence, that psychological component is to housing specifically.
Bob Preston: 09:42 That is really fascinating. I mean, I know for 2019 we started with the overall real estate sales market down. I think it did bounce back a little bit in February, but I think common knowledge, I know at least with the realtors that I network with, the common thinking is that, well, Gee, this is a supply problem, right? There's very little inventory of houses for sale, but I think what you're saying is that hey, there is a demand side to this as well and because of all this volatility, the demand is down. Am I in, am I getting that right?
Jordan Levine: 10:12 Yeah, you nailed it. I mean I think that it's both because of kind of fears about the broader economy, but also you know worries about the housing market in particular. I think up until about nine months ago, California's market and just the housing market in general was dominated by the supply side issues. We have like two and a half months of active inventory, right? So that means that we didn't, weren't adding listings, there wouldn't be any homes left to sell in two and a half months. But over the last nine months or 10 months, we've seen active listings really start to bounce back. In fact, at the beginning of this year they were growing by 33-34% and so, you know, it's not just a listing side phenomenon. If that were the case, if it was just still a market that was dominated by this supply constraint, what you would see is that these new listings would come on a 33% increase in active listings. You'd have buyers lined up to buy those and you wouldn't see things that we are seeing in the market. Like days on market going up, discounting, starting to go up, right? If it was just a supply issue, these listings would come online, people would be boxing, you know, snapping them right up. Days on market would not be changing and you wouldn't see sellers having to start discounting. And so although inventories tight, still from a historical standpoint, I think we're at 3.6 months of supply in March, which you know, compares to about six months as the historical average. It is a lot more than what it was a year ago. And you've also got kind of the psychological scar tissue, as I like to call it. We're folks saw their friends or maybe themselves or grandparents or parents or what have you, buy back in 2005, six, seven and kind of suffered for that choice. And they're, they're worried about that. So I go out and do these talks all the time and talk about these good economic numbers that we're seeing. And invariably I get, you know, the comment that, you know, yeah, but my brother just told me that prices, you know, aren't going to hold up or whatever it is. And so I think, again, coming back to the consumer confidence component, that people don't want to be caught behind the eight ball or what have you. And so, there's that kind of reluctance in addition to the fact that, let's be honest, affordability has deteriorated significantly and there are a lot of folks who simply can't afford housing.
Bob Preston: 12:20 Sure, yeah. Do you guys track age groups and, um, I guess persona types? For example, uh, I have three adult kids. Um, they're all millennials and they're kind of like, well, yeah, maybe someday I want a property bit. Right now, it's all about to sort of live in the life and being flexible and you know, perhaps I'll move for jobs. So I don't want to, you know, I don't want to dump my whole life savings into a property. Do you get that much out in the market?
Jordan Levine: 12:43 Yeah, I mean we do survey research all the time and look at things broken out by generation and you can see that, uh, I mean for me what's really interesting is not that they lack the desire for home ownership, but it's, you know, everything that I think used to happen in folks 20s is now happening in their 30s. That's right. So, people aren't getting married till they're 30-35 these days or not having kids. And those are the big drivers that precipitate home ownership. And so I think that, you know, when you ask them from a value standpoint, do you believe in home ownership? Do you want home ownership? You think that's synonymous with the American dream. They say, you know, A yes, but B, how could I ever afford that? And C, you know, I'm not ready yet. And so it's not, you know, for a lack of desire. I think it's both the wherewithal and also just like you alluded to that the stuff is happening later and they're staying more flexible and changing jobs more often than not making those big life leaps like marriage and kids as early as they used to.
Bob Preston: 13:39 That is really fascinating to study not only the economic trends but also sort of the socioeconomic aspects as well. Hey, I've heard there is a benchmark for kind of tracking home sales annually. Maybe there was some averages over the last 10 to 20 years and I've heard, I don't know if this is accurate, I've heard the number 400,000 you know, homes sold annually is kind of a benchmark. Is that true? Is that something you guys look at it? Did I have that number right or maybe you have a different one you track?
Jordan Levine: 14:08 Yeah, 400,000 is the benchmark that we look at. You know, in some ways it's just the kind of rule of thumb number to see if we're above a baseline average number or below. And in some ways it's, it's kind of a meaningless number on its own, but it does kind of suggest where we are, whether we're above average or below average. You know, the one thing I think that's really funny about that 400,000 number and I think maybe speaks to some of the difficulties that the housing markets had in California. As you know, we did 400 home sales more or less last year. Right? But that was in an environment where we have basically a 40 million person economy in California with almost 200,000 you know, real estate members, you go back to the eighties we were only about a 25 million person economy, only at about 115,000 realtors or something like that. But we still were doing about 400,000 right. And so, you know, I think that tells you in some ways that kind of encapsulates where we are in this market, that we've had all this great economic growth or populations, much bigger incomes are certainly much higher than they used to be back in the 80s. But yet we don't have the kind of housing turnover that we used to have.
Bob Preston: 15:20 Okay. So more recently rates are down. I mean overall the economy seems at least for now robust, but we've seem to still be at this stalemate. I guess that's primarily the consumer confidence and um, lack of affordability issue that's keeping the home sales at bay. And I guess compared to that 400,000 number, what does 2019 look like? I mean, are we ahead of that trend? Are we below it so far? Where are we at?
Jordan Levine: 15:44 Unfortunately we're forecasting that we're going to be below. So C.A.R.’s current position is that we're going to be down about 7% this year in terms of close sales. And you know, a huge part of that is on the affordability side, which in turn is a function of supply. You know, I think that I talked about the long-term trends where people don't seem to be moving as much across the board and there isn't as many homes sales. And I think that's really a symptom of this supply because we've had all this great growth, we haven't built a lot of housing. And as a result, you know, we can see it in our home prices that they're very high in some cases at all-time highs, depending on what market we're talking about. And you know, a lot of folks just simply can't get into housing anymore. And, and even with these kind of historically low rates, I used to joke all the time that my dad would drag me around to his dinner parties in the 80s and like brag about is 12% mortgage rate. And I know, and that was like a feather in the cap. All of his buddies had a 15% mortgage rate. Right. But even at 4% we're still not able to kind of move that needle on. And I really think that we just simply haven't built enough. And so even, you know, it obviously hurts the first time buyers who can't get into the market at these high prices. But even people who ostensibly look like they're doing pretty good, maybe they did buy one of those homes in the 80s and they've accumulated several hundred thousand dollars’ worth of home equity. Even in a position like that, where can you really go because you're going to sell and make a boatload of money with all this equity that you accumulated. But then you've got to turn around and kind of stare down the barrel of the current price environment. And you know, unfortunately that equity trading up to a bigger home or something like that doesn't get you quite as far as it should just because of how much prices have grown. You know, it's like all that equity is, is a strength, but it's also a weakness because that's the kind of equity that you're going to have to pay somebody else out for on the back end of that transaction. And so for people like my father in law who, you know got no mortgage really, and I've seen tons and tons of appreciation even for him to go out and buy a smaller condo or something like more in the downtown area, those things are not cheap. And he'd looking at a, a pretty big mortgage payment just to go from is kind of big four bedroom house into a smaller condo that's newer and closer to amenities and stuff like that. And so, it kind of affects the whole price spectrum from first time buyers all the way up to long term homeowners. And, and that's where I think the sales are really suffering.
Bob Preston: 18:08 That's interesting. I mean we talked about millennial's a little bit and reference to your dad, I'm assuming he's kind of a baby boomer era, right? And so, I mean, do you see baby boomers in California who may have even lived here their entire lives who have bought back in the 80s like you described, they have tons of equity just pulling the plug on California and selling their home and either, you know, getting an RV or traveling or moving to another state or maybe another part of California where the cost of living is much less.
Jordan Levine: 18:33 Yeah, all of the above. I mean I was just crunching the migration data yesterday and we saw I think 40,000 or so boomers leave just last year on net. So that's even after accounting for some folks who actually moved in. We had a 40,000 person net deficit moving out of California. But it's actually not just boomers and retirees. You do see folks go into low income tax, low property tax states in retirement. But we're even seeing this happen all the way down the age spectrum. And so we, so I think about 25,000 millennial's and another 27,000 Gen x. And so we actually had more people who are under 55 leave California. And then we had folks over 55 leave California and I think that as difficult as the state can be in retirement, it's also really challenging for folks like your kids who said, you know, look, we can't get into home ownership. We don't want to right now. I think if it wasn't so unaffordable they might sing a different tune on that.
Bob Preston: 19:27 Yeah, for sure. So a lot of dynamics at work here, which makes all this all the more interesting and I've heard you speak on your podcast about this technical term. I'm not completely clear on it so I'm just going to throw it out there and maybe you can help us with it in terms of explaining it in layman's terms and that's called the yield curve inversion and I think this pertains to the investment opportunity and how people are looking short term and long term. I'll let you explain it.
Jordan Levine: 19:52 Yeah, definitely. The yield curve was one of those super nerdy and esoteric economic terms that is really kind of making a fairly basic concept, much more complex. I think if there's one thing economists are good at, we're good at making something simple, complicated, but essentially what the yield curve is just looking at yields on different government bonds across different levels of maturity, right? And so, you know, I always think of the bond market in very first principles, kind of layman's terms anyway, cause that's all I can understand. But uh, you know, essentially when you're buying a government bond, you're loaning the US government money, right? And so the amount of return that you're going to get on that are owning that they're doing from you as a function of that inherent risk, right? And so if you're going to let them tie up your money on a 30 year bond as an example, and you're not going to be able to touch that and they could do whatever they want over the next 30 years, there's a lot of risk there that they might go off the rails and accumulate all these deficits and not be able to pay me back my money that I'm loaning him on the 30 year bond. And so, you tend to see higher interest rates on longer term borrowing, right? So if I'm alone the government money for a longer time than I have more exposure to their bad choices and I'm going to want them to pay me a higher rate of return to compensate me for that extra risk that I'm taking. The idea with the yield curve is that at the short end of the yield curve where the term is very short, like a year or a couple of months, the idea is that there's a lot less question marks about what the next three months looks like compared to the next 30 years and so I'm taking less risk and so I don't need you to compensate me as much for loaning you money over a short term period as I would over a long term period. Now when the yield curve inverts, that tells us something about what folks are thinking about the economy because now all of a sudden what we're saying by the yield curve and birding where meaning that the lower term securities and bonds are actually paying a higher rate of return than you would get for loaning the money for a longer period. And so that tells us that there's some fears about the underlying risk in the economy over the short run. Why would I ever loan you money for 30 years if I can loan you money for three months and get an even better rate of return on that. But it's reflective of this kind of this underlying risk to the economy where we think things could go south over the short run. And I want to be compensated for this extra risks that I'm taking. And so that typically is kind of batting a thousand in terms of an indicator being able to predict future recessions. They don't happen immediately, but pretty much historically, if you go back in time, every time the yield curve has unburdened, a recession has followed in the subsequent 12 to 18 months.
Bob Preston: 22:33 Interesting. So 2020 2021 if what you're saying is true, we might be facing another recessionary period. How does the yield curve inversion and the perhaps looking at a recession and a couple of years, how does that impact the real estate market now in terms of investing opportunities?
Jordan Levine: 22:50 Well, the good news is that it's keeping rates lower. You know, in the yield curve inverts, the Fed has a lot less incentive to start jacking up rates, which is what, you know, they're really largely affecting that kind of short end of the yield curve, those overnight rates in short term bonds. And so, you know, for us, I think the silver lining from a real estate standpoint is that the forecast for rates, we're actually revising ours down. We don't think that rates are going to go up as fast as we originally thought. Some folks stopped by 2020 we could kind of be in that kind of 5.2 to 5.5% range. That was based on where we were sitting in November with 5% 30-year fixed rate mortgages with the yield curve inverting and some of these global issues that we've already talked about. I think that rates are going to be a lot lower and so buyers have already got a bit of a reprieve on rates and that's actually why I think again, and you know, we might have seen even bigger declines of home sales during the first quarter had rates not kind of dropped back down to 4%.
Bob Preston: 23:51 And from what you can tell them what the Fed saying, at least today it seems like are the rates going to be held pretty tight through 2019, is it seemed like that?
Jordan Levine: 23:58 Yeah, I'd be surprised if we'd see them raise rates again this year, just given that the economy is slowing down, we've seen consumers start to retrench. We haven't gotten a good read on first quarter GDP yet, but I think if fits below expectations or even below the level that we've said over the last year and a half of two and a half to 3%, but people are going to be fairly disappointed. You might see the markets get jolted around and you'll definitely see the Fed being a lot more cautious.
Bob Preston: 24:24 It seems like a couple, three years ago the when the real estate market was rebounding a bid, it was driven a lot by investors. I don't know if you agree with that, but I'm wondering if we might be headed into another period like that because if rates are down and, and there's, you know there aren't a lot of consumer-oriented buyers out there. Is this potentially a good year for real estate investors who want to acquire a portfolio of perhaps rental properties and things like that?
Jordan Levine: 24:48 It really depends on time horizon. As with any investment, you know, I think that there is a period of relative flat prices coming down the pipe. But I also think that you have this kind of incentive, lack of incentive for folks to jump into the housing market as kind of owner occupants, right? And so, uh, we had tax reform, which we haven't really talked about, but that really did undercut by doubling the standard deduction so that you get a big deduction, whether you rent or own has really kind of undercut people's incentive to jump into the market. You also have that kind of brother-in-law effect that I mentioned before where even when the economy's good, their brother's telling them prices are going to go down. So, they don't want to jump in. All of that means, you know, if you add it up and look at it from an investor standpoint, more renters, right? And so, unfortunately the supply crisis that I mentioned isn't just isolated to single family home ownership homes. We don't have enough housing full stop. We don't have enough apartments, condos, town homes, single family, even luxury homes. And so just like how home prices have really had a severe run up, the run up and rents has been even more impressive and I don't see that going away because those are both symptoms of a deeper, more fundamental issue about this lack of new construction that we're doing. And so, you know, the rental market, just like the housing market might go up or down over the short run, but I think the long term trajectory is due to our fundamentals and the fact that we have such a booming economy and a growing population base and not enough places to house them, that the rental market always looks attractive over the long run from my standpoint.
Bob Preston: 24:33 That's really interesting. So yeah, I was going to get into that with you and start asking you some questions about the rental market because I mean most of what we've talked about so far has been the real estate market in general and buying psychology and things like that. What about the rental market? I mean I think we've had sort of a drive up of rents over the last five or six years. So, your projection, I guess based on what you're saying would be that is likely continue and there would be a high demand for rental properties because people aren't buying. Is that how you see it?
Jordan Levine: 26:48 Well, look, we have a lot of demand for housing full stop and if people aren't buying then they have to be renting and unfortunately the housing vacancy numbers are in the low single digits. So even with this kind of increase in apartment construction that we've seen over the last couple of years, it's really a small drop in the bucket relative to the 30 years' worth of under building that we've done as a state. And so, you know, I, I do see again with 4.2% unemployment with 2% unemployment parts of like the bay area or 4% Orange County, San Diego people are working and making money and they need somewhere to live. And that kind of bodes well for the medium and long-term price on both rentals and ownership.
Bob Preston: 27:30 Yeah, no question about it. We see that the job market, at least in our local economy here in San Diego County is pretty good. I mean we have a lot of people still moving to town and one of the things we hear a lot at North County Property Group is, Hey, I'm moving to town. I just took a new job. I don't know where to buy. I don't know the market for buying. So hey guys, you know, we want to rent for a year or two until we can figure this out and make sure that my job is stable. And so I'm guessing that there are a lot of markets like that in California, probably the bay area and some of the more populous areas throughout the state.
Jordan Levine: 28:04 Yeah, definitely. No, I mean the, the economy is a huge strength right now. And in some ways our biggest strength is also our biggest weakness because I think the great economy, this booming economy that we do have is butting up against this fundamental lack of housing that's available. And so you kind of always are never ceasing to be amazed at, you know, this kind of small home that goes for you know, three or 4,000 bucks a month on rent or you know, sells for six or $700,000. It's always kind of um, you know, never ceases to amaze that just you know, how strong our economy is and what that does to the cost of living here.
Bob Preston: 28:43 That's really interesting. So, in a lot of our listeners are investors or homeowners who are considering being in the rental market, maybe buying a more investment property and then having someone like North County Property Group manage it for them. So, what I'm hearing is that hey, the time, the rest of the year for 2019 at least is pretty robust in terms of the investment opportunity and the rental market continues to stay strong. And so, cap rates and things like that on properties would probably be pretty good for the rest of 2019.
Jordan Levine: 29:11 Yeah, definitely. And especially to the extent that you're going to finance some portion of these investments. I think you know, in some ways it makes a lot of a lot of sense to do that. Even if you've got a bunch of cash that you're sitting on, you know, just because the cost of borrowing right now again back down at 4% is channel. You're that kind of inner Ira Levine from San Diego. You know, thinking about facing those kind of 12 to 15% interest rates and this is a great time to kind of build that portfolio for the long term. I would advise against kind of looking these homes like how you look at your Scott Trade account. I think that that's one of the negative consequences of coming through the 2005 to 2009 timeframe is that we've started to look at housing like how we've looked at commodities or equity is right and that we buy low and sell high and we buy and sell. This is a long-term play. This is a play where you can be leveraged, right? If I walk into a bank and say, look, I've got a hot stock tip, you know, I need 500 grand to go out and buy some of this new biotech or whatever it is, they would laugh at you, right? But if you say that you want to go out and borrow $500 to invest in real estate and rent it out or what have you, they give you that debt position and you know what? You kind of reap the benefits of all the rents coming down the pike from a cashflow standpoint. But when it comes time to sell without appreciation, they're not equity partners with you, right? So, you've taken your 10% down or your 20% down and leveraged the rest of the 80 but you keep all of the profits. And that's why guys like my dad who were high school dropouts, who started out working at the, you know, Bob Baker, Chevy dealership down the road, was able to get in the real estate, sell some homes, accumulate some money, invest in properties. And in a lot of ways I attribute that and those investment properties to me being here kind of on this podcast, speaking with you today because my dad wasn't the or anything like that, but because of his investments and real estate, I was able to go to UCSB and get my degree, go abroad and study economics at a deeper level to come back and, and get these jobs. And that's kind of the beauties of home ownership and also kind of that kind of unique opportunity that, that investing in real estate provides. In some ways you can't do that and really any other sector just because of the leverage nature and your ability to kind of borrow to make these investments.
Bob Preston : 31:27 Right. So that's a great story. I love it, the family connection there and that description of sort of how it was and how it is now and but what it did for your family. I guess the moral to the story is if you're going to invest in properties right now, do it for the long haul. You know, it's not going to be a short-term sort of, you know the flipper scenario maybe 2019. I don’t know, maybe it's not the best year for that.
Jordan Levine: 31:40 So yeah, we don't need the 13 14% price increases over the next year or two. It's going to be more flat. So if you're looking to buy and sell and do all of that stuff then I would say that uh, you know, a rental property is not the best bet but over the medium and long term, I think that it makes a lot of sense.
Bob Preston: 32:02 So I love this kind of stuff and has been an amazing conversation. I could geek out with you all day, Jordan and I love listening to your comments and analysis. Unfortunately you and I are running out of time today and so I'm going to need to wrap up here shortly. But maybe for the listeners who want to hear more from you or about you and maybe some more of your analysis, could you give us a little bit of information on the Market Matters podcast that you host for C.A.R.? How they would find it? If they wanted to listen to some of those episodes.
Jordan Levine: 32:30 Yeah, definitely. So, uh, we're always nerding out every couple of weeks on the housing matters podcast. You can download that any place where you get your podcasts. We're on SoundCloud, we're in iTunes. I think there's other ones that my team have got it posted up so that it's there where you can find that. You can also listen to it on car.org or we have a lot of other, I mean our resources available on data and statistics at the local level. So, if you want to look at your markets and things like that, we're on social media at CAR Research and Economics, Facebook, Twitter, all that stuff. You can hit me there, listen to our webinars or email me or call or whatever. I'm always happy to chat housing. It's not just the job for me, it's something I really feel passionate about. And so, uh, always happy to chat.
Bob Preston: 33:13 Yeah, I can tell you're passionate about. That's fantastic. And thank you so much for joining the show today. I've listened to some of your podcasts. I think I found it by googling a Market Matters podcast, California Association of Realtors and popped right up. So that would be a good way to do it. Jordan, thank you so much for taking time to join the show today. Very much appreciated. That concludes today's episode. I would like to make a quick plug. If you like the content today, please post a positive review for Property Management Brainstorm. It will make our day and also pay it forward to encourage other great guests like Jordan on the show. And thank you to all our listeners for joining the Property Management Brainstorm podcast. Until next time, we here at North County Property Group will be in the field working hard for our clients to maximize their property value, rental income and maintain top tenant relationships. And we'll see you next time.
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