HOUSING MARKET IS A BUBBLE & ALL BUBBLES POP. What if The Housing Market is a Balloon & Not a Bubble

Closed Captioning:

one

good afternoon everybody it’s friday and

we have the fantastic michael zuber from

one rental at a time here and yes your

screens do not uh

confuse you he’s a pretty sexy tie dude

it’s not bad dude i couldn’t find my

dark purple so my light purple i didn’t

want to be too much of a shelf because

yours is yours is like a blue and pink

right yeah blue and pink yeah it’s got a

little blinging i don’t know if the

lights are picking it up oh look at that

wow yeah

dude i only kept the really expensive

ties this has got a little jewelry in it

i don’t know if you can see that’s

really nice see i’ve got a nice tie but

i’m a big watch guy oh yeah i left my

watch at home damn it i got to bring the

watch

i got a couple of those too yeah yeah

it’s the i won’t wear a gold chain so

the only my only option is a watch so

that’s kind of how that goes so mike

what we wanted to talk about in segment

two is just kind of talking about the

market you know the constant concept of

bubble bubble bubble it’s a bubble i

think you know what we did in the first

video was we really just tried to change

mindset on crypto versus real estate and

you know really what the what that

argument really needs to be or that

conversation needs to be because you

want to move that ball forward what i

wanted to do is kind of move the ball

forward on this you know bubble concept

because i think there certainly can be

bubbles but you know let’s kind of talk

through it and and kind of give people a

different mindset on this yeah i got

some comments here recently that really

led to this video

they’re basically saying things that i

agree with

we are in an everything bubble uh all

bubbles pop

uh you know don’t you remember the last

housing bubble right bubble was is being

thrown around

and

you know what

i remember playing with bubbles with my

daughter right blowing them and all

bubbles pop if that’s an accurate

statement they do

um

and then i’ve been telling people that i

don’t i think we’re gonna have a housing

slow down so for me i’ve been trying to

tie all of this together in my head and

i think this is what it is

i actually think the housing market is

not a bubble

i think the housing market is a balloon

okay

right and the difference is important

because again all bubbles pop

not all balloons do right you can blow

up a bubble a la real estate in 2006 789

that eventually pops too much air

stretches pops explodes it is amazing

thing

however

bubbles

i’m sorry balloons they can have slow

leaks

bubbles if you just let go of where you

can deflate at different rates

and that is actually what i think is

going to happen in real estate

i believe what we are seeing today right

so i do believe affordability is a huge

problem affordability is stretched

just like 2007. i get it i know the math

i talk about affordability all the time

sure

i just don’t see the underlying

cascading of inventory of 3 million

foreclosures because of all bad lending

right the arms the 2 and 28 all of that

so what i think is going to happen

is

uh we have jerome powell raising rates

we’ve already seen the 30-year up to

five and

five and a half we six and a half for

investors we are seeing supply

destruction which nobody’s talking about

but i am

so what i see going on right now is a

pretty significant um letting go of the

balloon

so what is going to happen over the next

three five eight years in housing

is

we are going to um have wage inflation

into an environment where the fed

eventually cuts rates i think much later

than most people think but i think we’re

going to have wage inflation and

eventually lower rates years from now

that will allow the balloon to not pop

so i’m not comfortable calling in a

housing bubble because you’re right all

bubbles pop

to me i think the real estate market is

a balloon can it pop absolutely sure

absolutely

i’ve been through it i have seen it we

lived it i and more importantly i called

it yeah i took action and got out ahead

of time

and believe me if i saw it

if i saw a bubble i would sell again

sure

i just don’t i mean i i frankly i hope

i’m wrong i’ve set up my portfolio if

i’m wrong it’s great but i just don’t

see it so to me i think the housing

market is a balloon

i think i think what we have is

lower transactions

um for the next several years we have

flat relatively flat

re nominal we have

flat real

housing growth and it goes up nominally

based on whatever inflation is so you

got to understand economics to get what

i just said but yeah i don’t see

i don’t see the housing market being a

bubble that has to pop since

so i had to i had to create another

image so i used a balloon yeah i mean i

think that’s accurate i mean you know

with my kids i like to you know squeeze

the balloon real tight so it makes that

wretched screeching noise

and you know what that’s i think it’s

going to be a wretched screeching noise

there’s going to be there’s going to be

plenty of pain but for people that are

also prepared for it

for people that think that we’re talking

our book

in real estate staying expensive

you’re stupid

that’s

no no i’ll say it because that’s what we

get in the comments all the time that’s

not the math

no yeah it is for we’re not real estate

agents people right exactly we’re not

selling anything our hope is cheaper i

cost basis goes down down that’s our

hope you know we don’t root for a crash

because we know the impact that it has

on people and families because you and i

both lived it firsthand dion lived it

firsthand

ellen kelly lived it firsthand so many

of your experts we’ve all lived that

housing and security firsthand we live

understand

so because of that we’re not sitting

there going yeah yeah yeah we want to

make more we need to make more we need

to crush everybody else that’s not it

we’re merely looking at the market and

trying to anticipate for ourselves for

our business and for all the people that

we employ not employees but contractors

i put 600 000 into contractors last year

wow that’s a lot of money that’s 10

decent jobs right and they didn’t work

for me full time that was just guys

coming and going and and the contracting

work so if you think that we’re talking

our book because we think that real

estate is going to be resilient and may

go down 5 10 15 20 over a multi-year

period and that rates are getting really

expensive

a great deal is a great deal

based whatever the rate is because it’s

based on your return on capital for that

deal

but then going the next step

yeah i’m talking the opposite of my book

i want if this were to fail i want to be

in the position

where i can then

invest into that space for people that

work prepared and then yeah i’m going to

get their asset that’s how it goes i

would again if

selfishly yeah nothing would be better

for me than another 75 percent crash oh

hey i’ve lived through it yeah b i have

a reputation i could if if the market

crashed 75 in in fresno

i could probably have 10 million dollars

lined up in 30 days

you you do you think you would

i think if it crashed even 50

you would be double in size within 24

months

uh yeah no question i mean

yeah there’s no question again when i

said 10 million bucks it would be from

private investors it was a big thing i

did

but yeah i would um

i did really well last time i bought

everything we could

i would i would go ham

yeah i i’m again fresno real estate

crashes 50 75

uh i am fairly confident that inside of

30 days i could have access to 10

million bucks and buy

everything

yeah

yeah i hope it crashes

yeah i mean that was the thing for us is

that i was in my

mid late 20s when it crashed and so i

was doing everything i can to kind of

put deals together

and getting private money for

that age and that lack of experience it

was tough it was really too hard to do

yeah i was

yeah last cycle 2010 i borrowed just

over 3 million bucks

um

it would it would be so easy to to

to get 10 this time oh i think the

number would be so much bigger

yeah it would be mike it’s fun to think

about it’d be so much bigger like you

could pick up the phone you could

probably get 10 million from a lender

yeah maybe

yeah it’s it’s it’s um

again if my words matter i hope fresno

crashes 75

crash crash fresno fresno crash

yeah so again we want to change people’s

mindset change people’s mindset from

this bubble concept to the balloon

concept number one number two is

we’re absolutely talking the opposite of

our book we much if if it crashed that’s

yahtzee from me and for mike because we

did all the work

to prepare

seven figures dry powder ready to go

ready to go and more most importantly

again if people go back and watch our

playlist we set up the debt structure of

the stuff we own exactly it can’t be

called it can’t be called like we i have

a few that can a few

major commercial that can be that said

the return on that capital and those

deals now is crazy and i’m using that to

pay that down so if it does risk if it

does if it does ever go down 30 or 40 if

it did i’m still fine they still

wouldn’t call yeah and again this time

around it’s a completely different

mindset from banks too on calling those

loans oh yeah

last time they were like call the loan

call the loan yeah cause they didn’t

didn’t own it they had it was yeah it

was all daisy chain paper correct and

you didn’t actually have to take the

loss on your paper yeah until you sold

it that’s why stuff was on the market

for or off market and on their books for

two three four years yeah because they

didn’t want to have to stack and take

all the laws they were being very

strategic exactly they’re like it was

how much can we eat this exactly

literally a little bit out and a little

bit out and a little bit out and that’s

how we got to where we got to

so again

please understand watch the whole video

really understand what we’re talking

about here when we say bubble versus

balloon and recognizing that we’re

talking the opposite of our book

because the crash

wouldn’t hurt us

if 30 of my renters stopped paying rent

i would recognize it obviously but i’m

still in business

still in business no problem and if

that’s happening i’m still going out and

buying more

still going on buying more and then the

last thing that i wanted to talk about

this concept to mike was of the letting

out of the balloon

we’re still not seeing that on the

rental side

on the roofer side right because we

talked a lot about the houses and things

like that what that market is and that

market itself but let’s talk just for

one more second about the renters

because one person pointed out to me

well you know and i think you actually

answered the question too they said

something to the effect of

well if that’s going to happen with

housing then what about rents you or

what would move rents i think you said

uh 10 vacancy

yeah i think was your answer it was yeah

again people are

rents so again i’ve been doing this 20

some odd years i have had

flat rents i have i had a little window

of time in 2006 where i had to do

move-in specials half off first month

rent half deposits it was the roughest

the roughest time to be a landlord was

  1. i agree

and that’s because everybody was buying

homes that’s right everyone

people that we wouldn’t qualify and

approve for a rental unit

we’re getting approved for a mortgage

no

repeatedly happened and i had i have

that’s not happening now mike nothing

like that’s happening that’s why we have

the best pool of renters yeah that we’ve

probably ever had and we’re going to

have even better pools going forward

because people are being dequalified

from buying that’s right they were right

on the line and then rates doubled oh

can’t buy now but they have a dependent

it’s

yeah so what would what would cause

rents to go down

the only well you know world war three

maybe sure uh but you know the black

swan but rents go down when you have

huge vacancies and ten percent

a decent number if somebody got to 10

vacancies if if i got to five percent

vacancies i’m lowering rent let’s just

be clear 10 which certainly caused me to

lower rents we’re nowhere close

well that was the other thing that was

my answer so my answer your answer was

10 vacancy my answer was the other side

of it which is okay i had i had

on an average everyday joe dated unit

b uh

c class property in a b class area i had

40 applicants in 12 hours yeah it’s

there’s it’s

rent is rent is at a record 18 i think i

remember on the daily financial news 100

1 827 it’s never been this high right

and it’s going to go up in the short

term yes it will

it will and we’re seeing more formation

of

uh

the nuclear household yep you know the

uh roommates brothers and sisters yes

you know older brothers and sisters yeah

i get it and well here’s the other

because i asked them

okay so you know why why you want to

live with roommates they’re like well i

can live in a studio apartment by myself

for 1200 bucks a month and pay all the

bills or i can live in this really nice

four bedroom home

multiple bathrooms all the extras and i

can do that for 750 bucks it’s a genius

move i hope more people do it again get

on the the whole thing we’re trying to

get here for folks is to get on the path

to financial freedom it starts with a

better financial future and house

hacking or rent hacking is a great i

want er i mean if you can i think most

people should give up the studio go get

three roommates yes

take that 500 make it discretionary and

come build up a little nest egg and go

by with three and a half percent down go

dominate go dominate a hundred percent

mike tell everybody where they can find

you my friend one rental at a time

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it’s so awesome get people need to get

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sure so one of the things that i love is

i love having the conversation with

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questions from a few people

and that way we can get through a bunch

of people’s questions like unique so

they get their question answered so

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we will see you in segment three

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