Video Closed Caption:
good morning good afternoon good evening
folks michael zuber one red solana time
it is thursday morning and that means mr
jonathan tumley is back how you doing
sir i’m doing well this is the sleepy
jonathan 12 today
you’re doing great man you’re worried
about a deal you’re up early exciting
it’s it’s all good man a lot of fun yeah
yeah hey so uh we are about to roll into
a new year right i actually just
yesterday put out kind of my forecast
for 2022. but again in your amazing
facebook group you put out a thought
provoking post that honestly i hadn’t
thought about before and that is where
do you see the real estate market in two
years right there’s always next year and
kind of long term but there’s very
little talk about the midterm so um i
thought we should talk about that you
could talk about multi-family and i’ll
talk about residential uh so what uh
what are your thoughts i mean
it’s it’s very hard to say right i mean
it’s it’s it’s in the future and we have
just so many different forces kind of at
work
right now it is it is difficult to say
if you look at sort of like the current
snapshot
of
the supply demand dynamic in
multi-family it’s very good for
multi-family right we have a lot of
household formation the millennials are
really coming into their their prime
household formation years
they need places to live
houses are very expensive they can’t buy
as many houses as they would like
and
there’s no other option but to rent in a
lot of markets especially in markets
where people are moving to uh you know
rapidly like the southeast so
the dynamics are quite good but it’s but
it’s not uh i want everybody to
understand it’s not limited to those
markets i mean we have a housing
shortage pretty much everywhere but even
even in some of the
the slow growing and even like
negatively growing places that the
housing stock is
is aging out faster
than
than the population is declining so i’ve
been hearing anecdotally
about people uh bringing apartments
online in like very small towns and
having waiting lists i was talking to a
guy at a party the other day who has
property in like upstate new york and he
said he has
he just bought a new property he has
people
he’s like a 30 person waiting list oh
wow to rent apartments in this like
three three bet this like three uh unit
place he has and in a small town so this
is happening everywhere so if you just
look at that snapshot
right
things are very good and uh so i would
you know most of the time you just say
well things will just sort of continue
the way they are i think that’s
probably
pretty likely okay however i do think um
that you know i don’t think that the
rent increases that people are getting
right now are sustainable no
uh when you’re talking about you know
sometimes 20
rent increases a lot of this is just the
bounce back from
covid when we had actual rent decreases
and now things are coming roaring back
uh so they’re they’re catching up right
so part of that so you can’t
forecast those things into the future
right and nobody is and if you look and
say like a co-star report you know
co-star is not forecasting these kind of
rent increases well let’s uh let’s be
clear i think there’s some syndicators
that are forecasting them but nobody
with uh a real kind of
oh sure well i mean listen i think there
are some fork some syndicators
forecasting these because they have to
and they have to exactly make the
numbers work the numbers work based on
what they’re paying for their property
it’s crazy deals i’ve seen the last
month yeah so there’s some there’s some
crazy stuff happening um
because there’s this kind of mania about
this fear of inflation and everybody is
driving people into buying uh hard
assets yeah which is what you want to do
during an inflationary uh period but i
mean as we’ve talked about before
you know
this is only hyperinflate you know six
percent inflation is only hyperinflation
if like you were like basically born in
2007 right i mean like it’s
it’s not yeah this is this is basically
like from 1945 until
night like 2005
this is kind of like what inflation was
sort of like three to five percent
all the time
and then sometimes get up to six and so
we’ve actually had this in 1990 we had
six percent this is so this is not
this is not the latin american debt
crisis this is not weimar germany no no
none of those things putting around
wheelbarrows full of money yeah to pay
for a loaf of bread i mean this is just
just a different situation
but people are a lot of people are
acting as it is and there are a lot of
people out there after
stoking panic
for
political reasons about hyperinflation
which just
just doesn’t hyperinflation i mean
something doubles it’s not even double
digit inflation right so yeah it’s so so
but anyway it’s driving a lot of people
into the asset class and driving cap
rates way down and when cap rates go
down you get
uh you’re just adding more risk to your
deal because you have less cushion so i
think that there’s going to be some
there potentially could be some pain if
people are underwriting
to these huge rent numbers uh in order
to
you know justify buying deals
at three caps and if there’s any kind of
hiccup in the economy or if there’s
uh if the inflation thing that uh you
know if everyone if you’re let’s put it
this way if your inflation predictions
are correct right i mean i’m not talking
to you michael i’m talking about people
who are hysterical about it
the fed is going to step in and raise
interest rates and that is going to
cause the economy to cool off a lot
which is going to you know a uh lead to
some job losses which is gonna take some
rent pressure off and b cause cap rates
to rise which is so you’re gonna get the
double whammy
of loss in value and if you haven’t
locked in long-term debt
this this could be potentially a problem
so
uh so i i’m not making like a general
prediction i is it up or down i’m just i
think there’s a lot of
risks in the system
and
uh you know i i’d say we’re kind of more
like on a knife’s edge you could go
either way okay but i can’t really say
like it’s definitely gonna be one or the
other yeah yeah so when i think about
residential i got kind of several notes
that i think are pretty
i feel good about again my crystal ball
is as broken as everyone else’s
but here we go so first off i think wall
street or kind of cash buyers are a
bigger player in two years than they are
today
for example just the q3 numbers just
came out yesterday reported on real deal
uh i think it was 18.2 percent of
transactions about 90 000 or so in the
quarter were investors 77 of those were
cash buyers
and that’s up from a year ago 11 so
about a 50 move uh so i think investors
uh are a bigger part of it again the the
risk-adjusted return in single-family is
the highest of of any asset at least as
of this year so i think they’re bigger
next year i think that’s a safe bet i
think rates are higher
right this morning i think i saw them
they were at 3.27 uh i think they’re
higher two years from now i think
they’re over four
uh again third year onarak all of that
uh obviously if that is true i think
lower affordability i think
affordability is the biggest thing i
track in housing
affordability is already
reducing i think it continues to but
obviously affordability is also made up
of wages and wages are going up so it
won’t i don’t think affordability goes
down as most people think because
they’re all most people when they think
about affordability they look at price
and interest rate and they forget
wages and again i learned that by
studying the 70s
another thing is i think but in two
years we are going to see the average
new construction home be smaller
i think the land the era of the
mcmansions are over i think we’re going
to see
the average new home be smaller probably
by
10
again we we have um you know we need
more units
in some areas
i also think there’s some new technology
that maybe goes mainstream this is
probably my biggest reach i would feel
good about three or four years for this
one is it the 3d printed home is it the
tiny home is it the container home what
is it uh i think again uh there may be a
new it won’t always be stick build for
for single family homes and then the
final one
is something i don’t feel good about but
i do think it lands in two years and
that is the 40-year mortgage
is now a
a
legitimate option probably only for
owner ox i don’t believe it will be for
investors just yet they will stick them
with the 30-year they want to give the
owners a better chance and again if you
go out another 120 months makes the
payment lower and people buy on payment
not on price
uh so when i think about single family
that’s kind of my running list
you know i i mean it’s interesting you
say that about the 40-year mortgage
right because
i mean first of all it’ll be
self-defeating because then the price
will just go up because the payment goes
down but you know there are
at the height of the bubble in japan
people were taking 100-year mortgages
in switzerland it’s very like 80-year
mortgages are basically like the
standard from what i understand that one
of my best friends lives there
80-year mortgage which is just nuts
right oh yeah like you
you’re never going to pay that off yeah
and like no wonder the price of housing
is so steep in switzerland right so
um
but we could see it you know we could
see it coming here it’s just we’re just
just going to make the problem worse
worse yeah i do think in two years they
will keep it separate that’s why it’ll
only be for owner occupants they want to
give him a fighting chance and yadda
yadda yadda investors will still be
stuck with the 30 year but that won’t
last they’ll eventually give the 40 year
to investors but i don’t think that
happens in two years
also i mean a lot of investors will
lie i mean yeah of course
i’m gonna move into that yeah exactly i
mean it’s it’s hard for like you know
blackrock to lie about it but you know
they’re not getting a 30-year mortgage
at least not david yeah no yeah i mean
we could we could do it if probably get
away with it but uh
you know
it’s
i mean i think i think you’re right i
think i think the the smaller home thing
too i mean i think it’s really got to
happen but as we’ve talked about before
it’s really dependent on zoning right i
mean if we if you can’t get higher
densities then
it you’re not going to be able to build
those smaller homes right yeah it has to
change though yeah you’ve got to pay for
these big lots that adds to the price
you can’t you know it just it just
we just we have to get to you know
smaller lot sizes you know back back to
like you know two family houses and they
don’t even build those anymore do they
but that’s those
if you think about like what a great
innovation the two-family house was like
specifically as an owner occupied rental
to help you to help you
cover your you know i mean this is like
a really wonderful thing
and uh
it’s not not built anymore right so
you can get back to that that’s very
cool jonathan this has been fun to think
about again something that had not
crossed my mind so thank you for putting
it out on your facebook group how can
people find you and find the group yeah
so the group is called the multi-family
investment community so just search for
it on facebook and drop by and say hello
and uh also just giving a little heads
up that i do have a multi-family deal
i’m working on now if you are an
accredited investor uh you should reach
out to me to learn more you can get onto
my list by googling two bridges asset
management llc and fill out the investor
form and be in touch very cool thanks
john
yep