Inventory Is Building Fast at Retailers & the Housing Market. Could we see Massive Deflation by Fall

Closed Captioning:

good morning good afternoon good evening

folks michael zuber one rental at a time

back with his good friend matt the

lumberjack landlord how you doing buddy

i am super excited to be here it’s

tuesday

long weekends trying to really ease my

way into things so hitting it off this

way on a tuesday i love it i love it

well hey one of the things we need to

talk about is um really kind of a

two-step function

i don’t think there’s any question that

inventory is going to be rising in lots

of things obviously we talk about real

estate all the time i don’t think it’s

any secret that inventory is going up my

buy box is doubled in six weeks

we saw retail earnings from walmart and

uh target in amber carmy and fitch and

many others talking about inventory up

so uh one of the things that we need to

talk about now is we need to translate

inventory going up

what might happen

and

could there be deflation

around the corner and we’ll talk about

maybe by the fall this is obviously a

topic that kathy wood has been talking

about for quite a while

uh that what we are going through is

kind of a

snap and on the other side of this is

massive deflation so where do you come

down on this you know inventory leading

to a massive deflation

as soon as the fall

too fast

yeah potentially but just too fast i

think so i think we’ve seen

you know inventories while they’ve

increased six weeks right they’re not

going to double again in six weeks

they might go up

that the same rate right like 500 500

yes so we’ll go up 50 yeah i think

that’s exactly reasonable because if we

look at what happened like with

foreclosures back in eight nine and ten

it was three it was kind of consistently

like 250 to 300 and sometimes there were

ups and sometimes there were downs but

it was kind of consistently in that

range i think largely we’ll start to see

that happen you know and it’s already

started happening in a number of markets

um my market is uh for

uh for my buy box

is up 300 in in two weeks wow we went

from we went from one to three well so

that’s that’s why you got all these

channels talking percentages right right

exactly up 300

yes exactly so i get the shock value of

that but again it went from making one

bad decision or one opportunity to make

a bad decision to three opportunities to

make a bad decision because they are all

outrageously overpriced yeah like at

least 20

over what they would appraise for or

combat like what 20 over so

i like what we always talk about which

is

that’s a that’s a wish price not a real

price and so so long as you’re dialing

it back

and looking at the sales figure you’ll

see that there’s still an increase over

last year so i think on the deflation

side i think that

it’s

it’s tough to make those calls because

we don’t know what the fed’s going to do

we don’t know what the government’s

going to do we don’t know what room new

rules there are going to be so i think

it’s tough to make those calls

i think i think the best call at this

point to make is that there’s an ever

shifting market

i think that people should still be

doing the work every single day to make

sure that they’re seeing exactly what’s

occurring in their market but i think

deflation by the fall

mike we’re talking three months yeah

september’s the fall

come on like

three months and all of a sudden we’re

gonna go from

inflation to deflation

and there is the whipsaw i’m gonna take

your word for it on the abercrombie

thing because they haven’t made a pair

of pants that i’ve been in since i was

about 13 years old

so that ain’t happening for me

i just go and i test out how big my arms

are when i put their leg when i put them

in the leg

i’m just like it gets stuck at the calf

here every single time

so what i think is really interesting is

i think there is that whip saw effect

i’m seeing that in construction products

too yeah um lumber

lumber lumber’s coming down quite

significantly you know we’re we’re less

than half of where we were at the peak

yeah so i think i think i think there’s

really when you talk about deflation

and then you talk about the fall you’re

right three months away so as an

economist as somebody has looked at cpi

in details kind of how it breaks it

apart

i think there is every chance

that some aspects of cpi show negative

numbers aka are deflationary

i think clothing is a great example yeah

i think what we are seeing

when you read target and walmart and

others right calls and there there’s a

whole list of five or six companies

retail companies that saw inventories

explode uh 30 to 50

that’s a problem

so i think there will certainly be some

aspects of cpi that will be deflationary

uh they will be line items not entire

categories yes uh i think some of that

can move quickly

when you step back and you look at the

larger asset of real estate which is

what i’ve looked at for 20 some odd

years it just doesn’t move that fast

right for heaven’s sake a natural

transaction i.e contract

to closing let alone

listing to closing

is 60 days right right you go into

contract today there’s a good chance it

doesn’t even record

for 60 days correct so to call deflation

in real estate by the fall or a hundred

days from now

is

it’s just way too fast it’s just way too

yeah prices

prices don’t correct that fast no if you

were going to talk about now nobody ever

talks this way

because transactions aren’t deflationary

but if you wanted to tell me real estate

transactions would be down 20 by the

fall

i could get behind that yep absolutely

i think i think it’s going to be faster

than that i think transactions are going

to fall fast than that so

you know

in looking at my market i saw a property

that went on for i think it was

619 um

wish price yeah

they still got six

wow now

that six

is like 27

higher than a year ago

geez so all i’m gonna say is

wish price

actualized price yes it’s a yeah it’s a

comp now

right that’s now a comp and the problem

is is that you know still appraisers

they have a difficult job in that regard

with a fast-moving market fast moving

either way makes a appraiser’s job

really difficult yeah but i’ve seen

stuff not appraised out but i’ve also

seen stuff where i was just like

how did they get there like that

number’s nuts but to your point becomes

a comp

yeah so so when we look at deflation

longer term which is i think what more

like we should talk i believe if you’re

going to talk about deflation in in cpi

or in in housing you really got to look

out at least six months yeah i agree

right if we if we were talking spring of

2022 or 22 2023 gosh getting ahold um

that’s probably an interesting

conversation certainly summer of 2023

but yeah i think there’s a lot of hopium

yeah i think there’s just a lot of

people that hope real estate crashes

like tomorrow

and unfortunately

um transactions can crash that fast look

at new homes right 17 in 30 days that’s

a crash sure but it wasn’t price right

it’s just it’s it’s

real estate’s much slower than that but

any in the end i certainly hope cpi

comes down let me kind of close with

this cpi is way too high 8.3 i hope it

comes down there will be components of

it coming down but there will be others

like food and gas that are going up

so it’s it’s

it’s not getting better for a lot of

folks i wish i could tell you i thought

it was

nothing would make me happier than

saying inflation is breaking because

i’ve been that kid who didn’t have food

who packed up his you know all his toys

in one suitcase and was a weekend from

moving i remember that and um

i know there’s some some some just

uncomfortable conversations going on and

thoughts and moms and dads crying over

their checkbook because they don’t have

money to buy food and all of that

we had a cocaine and red bull fueled uh

two years uh stemi checks and stimulus

and all of this stuff rained down and

uh

monetary policy was

drunk and unfortunately the the price is

inflation so i don’t see deflation

in 90 days i don’t see it by the fall i

certainly don’t see it in housing

housing doesn’t move that fast i do see

transactions adjusting very quickly we

have destroyed demand i think we’ve

destroyed supply as well

uh so that’s my thoughts on deflation by

the fall any closing thoughts and where

can people find you

um they can find me lumberjack landlord

at on youtube and on instagram and i

think my only closing thought is i think

that where we’re different than the

posers who talk about this stuff that

don’t do it yeah is that you know we’re

gonna have other videos today they’re

gonna talk about exactly what we did and

kind of take people through that and how

we prepared if you don’t know how we

prepared look at any of the 7000 videos

that mike’s done on his channel but

especially the last six months we did a

lot of things preparing for this exactly

we’re not talking our book when we say

that the market’s not going to crash

we’re actually talking the opposite of

our book but we’re happy to do that

because we’re just telling you what we

think is coming based on our experiences

and what we’re doing day to day yeah and

let’s not be confused you and i are in

the market for lots of things right we

own some rental properties right over

300 combined

and uh i don’t know i bet you our

combined spend on expenses in a month or

just on just on capital right fencing

and windows and all that stuff’s got to

be six figures

combined yeah i’m always in the business

and i can tell you a fence a fence i

just did a new fence it was it was

smaller than the one i did last year but

not by much

was about 40 off lumber’s cheaper yeah

right so that’s inflationary we were 8

000 bucks on a roof and now we’re 6 400

on that same roof so yeah we just and we

had a bunch of stuff that we quoted out

kind of last year we could

kind of looked at you know and so um

yeah definitely i agree yeah

very cool thanks buddy thanks mike

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