The Great Housing Shift: Prepared for the Surge?

Andrew Brill 0:00
Hello and welcome to Wealthion, I’m your host, Andrew Brill. The housing market continues to be affected by interest rates. But new housing sales reports are out. And we’ll diagnose what’s happening with respect to real estate right now.

Our mission here at Wealthy on is to help all of us keep and grow our money. But Wealthion is not just a channel, it’s a conversation with our community. So please keep the feedback coming. There’s something you’d like us to talk about or someone that you’d like to hear from, let us know. If you could like and subscribe to the channel, we’d really appreciate it. Now, let’s dive into our discussion. I’d like to welcome to the show the chief economist for Middleburg communities. Brad Case. Middleburg communities is a developer builder financer owner operator of rental housing communities in the mid Atlantic in southeast states, red has over 30 years of experience researching rental and non rental real estate, both here and globally, right as a PhD and provides analytical support for sea level, buy, sell, develop, and market focus tactical decisions regarding where to direct resources to finding land to develop, or properties to buy. Brad also has many letters beside after his name, Ph. D. And many others, Brad, welcome to the Wealthion show.

Brad Case 1:17
I’m glad to be with you, Andrew.

Andrew Brill 1:19
So Brad, you know, with respect to real estate, tell me about the economy. And let’s start there the Basic Economy and how that’s affecting real estate.

Brad Case 1:29
Yeah, the economy is actually quite strong and it and has been strong for several years. Now. There were a couple a couple of years ago, there were quite a few people who thought that we were going to a recession. And I did not, I always figured out, you know, I was looking at mostly at the data. And I said that I would say as soon as the date had seen indicate that we were going to reset, but it never did. So I actually, I have a model where I predict the probability that will go into a recession sometime in the next year. And it’s currently at about 20%. And so obviously, you’d like it to be you know, more like to, but 20% doesn’t doesn’t suggest we’re moving into recession. And it’s an it’s really a an economy that’s been strong for lots and lots of people nationwide, it’s never going to be strong for everybody. But the labor markets are strong, and people are responding to that a, you know, their their income disparity and growing or wages have been growing. And they’ve been using their income and wealth to buy things. That’s what, what a strong economy needs all of that.

Andrew Brill 2:38
So lately, you’re absolutely right, economic data inflation, you know, over 3%, the Fed obviously wants it down near that two, Mark. So I don’t see interest rates coming down anytime soon, at least not until the summer months, maybe even a little bit later if this data keeps showing improvement or non, you know, inflation not coming down. What about consumer spending? Because that has ticked down slightly? I know that wages are up and everything looks great, but consumer spending has ticked down slightly. Where does that fit into the economy and the real estate picture.

Brad Case 3:15
So the most recent print on retail sales did tick down slightly, as you mentioned, and I’m I’m keeping an eye on that. But for the last several years, there have been sort of month to month, there has been one or two pieces of data that did take a little bit in the weaker direction. And so you pay a little bit more attention to that. And you see whether it becomes a trend. But when it’s one point, it’s merely something to pay closer attention to. So So yeah, I’ll continue to to pay attention to that. But it is not yet suggesting real weakness in in consumer spending, and therefore not in any in the rest of the economy.

Andrew Brill 3:56
What about consumer confidence? We hear about consumer confidence? Honestly, I’m not exactly sure how they measure that. But consumer confidence seems to be a little bit higher, I guess, then the consumer spending. So how do we how do that? How does that fit into everything?

Brad Case 4:10
Yeah. So there are a couple of organizations that actually survey individuals and say, how confident are you that things are going to be, you know, better you and for the economy, and in some cases for the housing market enough? That’s our thing. So I’m going to talk about consumer confidence. That’s really what we’re, what we’re trying to try to talk about the data that we get by asking consumers, how do you feel about things? And you’re right, it has ticked up more strongly recently. And what’s important about that is that you are mentioning that the Fed wants to get inflation down to 2%. And by many measures, it’s already there. But that’s not enough. The the Fed needs to make sure that it’s going to stay there. And so they’re paying attention not just to what the current inflation numbers are suggesting thing, but what what signs there are that it might in even turn up again. And one of those is is how strong consumer confidence has been. So consumer confidence is great. But the Fed is looking at that and worrying that maybe if consumers are that confident that then they’ll start increasing demand overall. And that will increase inflation again. So, you know, there are lots of pieces of data that we have to look at. Some of them work one way some of them work the other way. And you got to be, you got to be careful that, that you want an economy where they’re all in balance, you don’t want things to be roaring,

Andrew Brill 5:41
do you see differences in different parts of the country? I know, you look at, you know, a broad landscape of real estate stuff. Do you see differences in different parts of the country in terms of confidence spending in the real estate market?

Brad Case 5:56
So in terms of Sir General confidence, and things like that, no, not really. However, in the real estate market, it’s very, very important. Because what we’ve seen for decades is people moving from high cost cities, places like New York or San Francisco, to the southeast, and more generally, the Sunbelt. And what they’re looking for is a better lifestyle that includes a lower cost of living as well as better weather. And, and when for a long time equal, individuals were interested in doing that. But the problem was getting a good job because the company’s work. What we’ve seen more recently, is that the companies do want to move out of the same high cost areas, basically, for the same reason, and they had been resisting it before. Because in the Sunbelt, there wasn’t much sort of cultural life. And so maybe for the lower level employees, that would be great. But the but the for the upper level employees, they are seeking thinking, I don’t want to live in a place like Charlotte, well, now they do. Or a place like Austin, or a place like Nashville, or a place like Orlando, there are lots of cities in the southeast are more generally the Sunbelt that are more appealing now, not just to the individuals, but to the high level decision makers in those companies. And that means the bacon, they can move the company down there. And not only will there it will they be able to find workers, but the people they already have working for them will be interested in moving with them. And so there are really very important differences in the housing market between, you know, different parts of the country, those high path high cost, northern colder areas, and the lower costs, more pleasant areas down on the southeast, that

Andrew Brill 8:05
So what does it mean for those higher costs? Cities? Obviously, prices are going to have to come down, there’s going to be, I guess, a glut of office space as there there is I know in New York City, what does it mean for those cities where big corporations are moving away? They’re taking employees with them. So there’s, there’s excess there?

Brad Case 8:25
Well, I don’t want to over dramatize it. There’s a movement, it’s not going to those, those those places are not going to empty out. There is two wonderful place to empty out San Francisco, Boston, those are wonderful places. But marginally speaking, we’re going to continue to see people and companies moving to the southeast. So it used to be that when we talked about population shifts to this to places like Florida, we were talking about retired people. And now we’re not. And that’s important in the housing market, because retired people want a particular kind of housing and typically need a lot of medical services with it. But younger employed professionals are looking for different kinds of housing. And so that really strongly affects the housing market. So going forward, you know, those cities in the Northeast are going to have to figure out how to deal with the Office properties that currently exist, that aren’t what people are going to want in the future. But the cities are not going to empty out.

Andrew Brill 9:29
Let’s get into the nitty gritty, the Fed the interest rate, which seems to be I guess housing prices are contingent upon interest rates, interest rates go up that the prices come down. You know, you’ve been around a long time you’ve seen interest rates go up and go down. You’ve seen interest rates it for houses, you know, mortgages 1314 15% When will this come down and five, you know, five 7% is not high. You know, consider During where it’s been, but when the Fed looks at this, what do you think they’re looking at it, we know that they’d like to see inflation very, very steady at around 2%. When might this come down? How will this affect the housing? Well,

Brad Case 10:15
I think that with you, we may see a reduction in the Feds interest rates, maybe in the middle of this year, maybe later. And it’s an open question to me whether we’re gonna see it at all this year, given how strongly the macro economy has been. If I were thinking about the housing market, I wouldn’t, I wouldn’t, I wouldn’t put a lot of I wouldn’t think too strongly that mortgage interest rates are going to come down dramatically. When people are thinking about buying a house, we often talk about, well, you know, the effect that interest rates have on that, and it’s up, and they do, but they shouldn’t, you know, there’s really one reason to buy a house. And it’s because that’s where you want to live. And you can only live there if you buy it. And you can afford it. And but too many people think one of two bad things one I should buy, because it’s a good investment, you should not buy a house because it’s a good investment. And number two, if I stretch, I can afford this mortgage payment, you should not stretch on your housing. You should you know, if you get you’re thinking about things where you want to stretch on, alright, stretch to take that little vacation, okay, stretch to, to buy the exercise equipment that you shouldn’t have in your basement. Okay, but don’t stretch for your housing. That’s how you get in big trouble. And people who stretch for their housing, and especially people who buy because they think it’s a good investment, even though it’s a stretch, those are the people who get themselves in trouble financially. And it gets very difficult ever to recover from a mistake like that.

Andrew Brill 12:04
What’s the percentage, you say, Don’t stretch, what’s the percentage of income that somebody should look at? For a mortgage or something like that?

Brad Case 12:13
You know, that’s not really a very good way to think about it. Partly because when you’re thinking about the payment you’re making, the question is, what are you getting for that thing? Here’s a better way to think about it. I think the very first thing you do I tell this to people all the time, the very first thing you do is if you work for somebody who matches your contributions to a 401 K, or another retirement account, then the very first thing is you make sure you get that full match. Because if you don’t, you’re just telling the employer don’t pay me so much. Then the second thing you do is you pay off all of your credit card debt. Okay, then the third thing you do is you bought you get a place to live and you buy food to eat. And people think I’m joking, when I say that, I’m not really your, your first priority has to be to take all the money that you have available to you, from your employers match your second problem. Second, priority has to be stop paying so, so much I almost use a bad word there. Stop paying so much in interest on credit cards, okay? Now, after you’ve done those, then you’ve gotten your food and your place to live. Now, you start maximizing your retirement contributions, because people often say you’re going to retire, you can borrow to go to college, you can borrow to send your kids to college, you can borrow for all sorts of purposes, you cannot borrow to pay retirement expenses. So after that, then you think about all right now, I’ve got my minimum minimum housing, and I’ve set aside for retirement. Now I can talk the start thinking about getting a nicer place to live. Don’t do that until everything else else is taken care of.

Andrew Brill 14:07
That’s a phenomenal way to look at it. I think that when I bought my first house is like okay, I need a place to live. And you know, having kids myself, young kids and in their 20s and teens. They don’t look at them and think about retirement although my kids are have Roth IRAs, they’re putting money away and they’re they’re preparing for that, but I don’t think kids these days, Gen Z is thinking about oh, you know, I’ll think about retirement later. But that’s an awesome way to think about it not only the retirement piece, but the credit card piece where you know, I also see kids getting credit card to pay off another credit card. This one has miles this one has perks and they’re doing that it’s a dangerous game. And financially it could be devastating.

Brad Case 14:53
Yeah. Yeah. And in fact, when my children were first getting credit cards I and they were asking you about it You know, cashback and miles, I said it avoid all of that. You don’t need any incentive to spend money. It’s true. What you need is a good way to make a purchase, but not spend a lot of money. And so, you know, so it’s a matter of your priorities. Years ago, I was involved in a, in a research project where the idea was, let’s define what it means to be middle class. And they started by saying, all right, middle class means you can buy a house, in whatever city you’re living in, not a fancy one, just a normal one. And you can afford to send your kids to any college they can get into. And you can afford that. And you’d say, pre retirement. And I thought, I said, Are you kidding? That is not middle class, middle class, people have to give up at least one of those. So if you’re, if you’re wealthy enough to do all three of those, great, God bless you. But for most people, you’re going to have to make some make some trade offs. And the first trade off you should make is not getting such a such a nice house. Because you can save a lot of money. Especially if you avoid buying, and use that money to get ready for your children’s college and or your retirement.

Andrew Brill 16:25
Interesting. So how do you look at I know, middleburgh communities does rental stuff? How do you look at renting versus buying? If you own a home? Maybe you’re downsizing? And maybe you decide, You know what I’m gonna move with my company? Do I rent first? Do I take the money that I got out of my house, put it somewhere where it can grow a little bit or pay my rent? How do you look at buying versus renting?

Brad Case 16:50
So I think it’s a very important question, because most people do it entirely wrong. What they do is they look at the payment they would make on their mortgage, and they compare it to the rent that they would pay. And it’s you have to keep in mind that when you buy, you’re taking on a lot of other expenses that are included in your rent, things like the property taxes, may the utilities, things like the the dues that you have to pay for the neighborhood pool, because you’re renting a place that has a pool already. So so the but the even bigger mistake that people make is if you buy a house, you got to take a big chunk of money and put it into nothing about that house. And as an investment, housing is a is not a very good investment. A much better investment is to put your money into into a an ETF that invests in the broad stock market, that overall over the 30 years that you would spend paying off your mortgage that’s going to provide generally speaking, much higher returns. And so when you’re thinking about buying versus renting, it’s not just the cost of buying versus the cost of renting. It’s also what can I do with that money if I weren’t putting it into a down payment for a house. And what I should be doing is putting putting it into an IRA or a 401 K. And that’s invested in the stock market. So then I’ll be ready for retirement or putting it into a 529 plan. So that my so that it’s ready to pay my kids college bills when they’re old enough to go to college. That’s a much better way to think about how to how how to compare buying versus renting. If you buy a house, okay, great, you got a house, but you’ve given up a lot of other things to get there.

Andrew Brill 18:39
It’s that opportunity cost that you give up obviously, by purchasing a house, but a lot of people read look at a house, they say okay, I’m gonna buy this house, I’m gonna live here for 30 years, I’m going to pay it off. It’s an investment. But that’s my IRA.

Brad Case 18:55
Great investing is great, better to invest in the stock market, or what I really mean by that is a blended portfolio of stocks and bonds, say put your money into a into a target date fund. So that you have a a easy, low cost way to distribute your money among stocks and bonds instead of sinking into your house because the long term returns on houses are actually quite low. And the other thing is that you have a lot more flexibility when you invest in another asset on the house. If you need some extra cash, it’s a lot easier to sell a little bit of your investments from stocks and bonds than it is to sell your daughter’s bedroom.

Andrew Brill 19:43
You’re absolutely right. So when when you’re with Middleburg communities and I know you don’t go out and do the selling but if someone was if a customer came to them and said no. You know what I’m thinking about renting with Middleburg communities, or I’m thinking about buying over here on this side. The Town, how do you convince them that, you know, renting is the way to go? I know we just went through all this, you know, the opportunity costs, put money away, do it? Is that how it works as you guys try and sell them on, look, use that money, put it away for all this stuff and, you know, rent this place?

Brad Case 20:17
No, that’s not, that’s not what we do when when we talk to people about renting when our apartments or our single family houses because we have a lot of those as well. What we’re saying is, you’ve already made a decision that you want to look at renting one of our community in one of our communities. So let’s show you what we have. So what I’m talking about is a decision that you that you make long before you start visiting places too, that you may want to rent, or you may want to buy. So we’re not talking people about the rent versus buy decision, we’re just saying, we’ve got something that we think is pretty good, we’re not in a luxury space. We were we build and rent what we call middle market class A. So we’re not an elderly housing, not that we won’t rent to elderly people. It’s just not who we’ve developed for. We’re not in student housing, same thing. It’s not that we wrote on rent to students, it’s not least developed, or we’ve developed for younger households made it a habit gets maybe they don’t get have kids, they’re employed, they’re looking for a good place to live that, that that represents a good way to use their money. And once they talk, they’re talking to us, they’ve already gone through that part of the decision.

Andrew Brill 21:35
So talk to me about the housing market right now we’re where are we? You know, I know that there’s people say, Well, you know, I, my the interest rates are up, so I have to sell at a lower price I don’t want to sell then there’s people who well, the interest rates are up, I don’t want to buy because I’m going to have to pay more for my mortgage. Where is the housing market right now?

Brad Case 21:53
Well, houses are extraordinarily expensive right now, the good thing is that incomes have grown strongly, too. So. So we talk about our housing affordability crisis. Honestly, housing is always difficult. It’s always such a big piece of your overalls. So we’re not really in a crisis. In that sense. I don’t want people to think I don’t care about how hard it is to afford housing. It’s always hard to afford. But what happened during the pandemic, was a big increase in the number of people who moved out of their fraternity brothers and sorority sisters shared out, they moved out of their parents basement, they said I want my own place. And so what we you know, what we call that is an increase in that headship rate, the number of adults who are heading up their own household rather than in a household with somebody with somebody else, whether it’s friends, or parents or whatever. And so that is increased demand for housing across the board. And so when we look at how expensive housing is, that’s the biggest reason is that lots and lots of people have wanted to move out and get their own housing, whether it’s buying a place, or more likely signing their first lease. And going forward, what has happened as a result is that there’s been a big increase in the number of housing units that are being built, both for buyers and for renters. So during the pandemic, the first thing that happened when people started moving out of their, you know, their housing with their fraternity brothers, is that rents went up, rents have now come down again, house prices have not. So renting the price of renting has become a lot more reasonable now than the price of owning. But on both on the owner side, and on the renter side, there’s a lot of new construction. And that’s going to make housing a little bit more affordable across the board, you really should be should be looking at the price of houses, not the mortgage rate on houses. And you should be looking at the price that you pay when you when you sign a new lease. And as you said, that is no longer has no longer increased dramatically, whereas house prices have

Andrew Brill 24:14
new home sales just came out. And they were obviously lower than what was expected. What did we read into that?

Brad Case 24:22
So I actually read it, it’s pretty good. I I worry about the state of the overall economy. And one of the things that I was concerned might really tank the overall economy is a continued growth in New Home Sales. Before this latest report on a new home on housing sales, it was looking a lot like 2005 2006 Before that big mortgage market meltdown. And so, so the fact that the data came in a little bit stronger as you note it was good news to me. Uh, so I, I think that what it’s telling us is that we’re in a more normal market situation. People shouldn’t be panicking when they make their housing decisions. Whether it’s about homeownership or about renting, it looks as though the economy is still on solid footing. And as far as I can tell, will be for a good long time. So that’s very good.

Andrew Brill 25:23
So in terms of the economy prices are up, which means building prices for building materials are up, does that when I guess when the prices for building materials go up, that creates housing that is more expensive, new home sales, or new home prices are more expensive as well. So if the I guess of the, you know, it’s a double edged sword, you want the economy to come down a little bit or slow down a little bit, and that brings housing prices down. But the economy is so strong that the prices for these new homes are also very strong.

Brad Case 25:57
Yeah, and I think more generally, it’s not just the price of building materials, but also when we talk about interest rates, because when you’re building new housing, you’re borrowing money to do that. The effect that both high prices for building materials and high interest rates have on the supply of housing, is that it kind of washes out the people who are not very good at what they’re doing, who got into develop the development business because it look easy. And things were so cheap. We don’t want it to be cheap. We want a situation where housing is being developed by people who are who can do a good job of developing it. And so companies like mine, we put a lot of effort into setting up relationships so that when prices of building materials go up, or when availability becomes a problem, we have a little bit more of a pipeline of those materials than other people do. So I’ll give an example. During the pandemic, suddenly, it became very, very difficult to get appliances, dishwashers, and washing machines and things like that. And it affected us it affected everybody. But we were able to set up relationships so that we were able to get access to appliances before a lot of people work. And so a lot of other developers who didn’t have those relationships, who didn’t have the sort of decade plus of experience, building housing, they were stuck much more than we were. And going forward, we can deal with interest rates that are relatively high, we can deal with problems with the with the availability or cost of building materials, there’s not that we’re happy about it. But the better developers will continue to provide housing even when conditions aren’t as easy as they were for several years. So I so I don’t think that people should again, worry about it very much, you’re gonna see people who are saying, Oh, my God, I’m in trouble, I need help. Now you don’t, you never should have gotten in the business in the first place, because you didn’t really know what you’re doing. Or they’re setting we need lower interest rates to get these projects off the ground. Well, we’re probably talking about projects that should never have gotten off the ground in the first place. So let’s just continue dealing with the economy as it is, and people are gonna be fine. Now, as a general rule, some people are gonna hurt. But as I said, if you’re if you’re gonna hurt, because you really didn’t know what you were doing, but she said, all interest rates are so close to zero, let me become a developer. Well, you made that decision several years ago, and the rest of your people in the country should not be bailing you out.

Andrew Brill 28:46
Do you see, we’re going through another I don’t want to call it a banking crisis, but a banking issue with with in terms of commercial real estate. And because there’s just I guess, loans that aren’t being paid. Do you see that? Like, when when people get into the business, as you said, to become a developer, but then all of a sudden, they don’t really know what they’re doing? Do you envision a banking issue in that respect, as well? Or the banks that smart? They’re like, Nah, you shouldn’t be we’re gonna loan you a little bit of money, but you shouldn’t be in this business anyway. No, I think

Brad Case 29:17
I think it’s appropriate to be worried about the state say that the banking system, and you know, I used to work at the Federal Reserve Board. I know they’re worrying about it. So, but you have to keep in mind, a couple of things. Number one, we, we being the country have been through a process over the last 20 years of trying to make sure that banks are going to be resilient, even when major pieces of their loan portfolios get weak. And the and that’s certainly what’s happening now. But people often talk about it as a commercial real estate crisis. It’s not. It’s an office crisis. And so there are going to be bad banks whose exposure to office buildings is too high. And you’re gonna see them, fold it into other banks. But not every bank is put themselves in that situation. And so the Federal Reserve and the other federal regulatory agencies like the FDIC, will be paying very close attention to try to head off that kind of a problem and solve it as it comes up so that we don’t end up with a with an industry wide prices. I think, as I said, we’re right to be concerned about it. But fortunately, we’ve been looking at this sort of problem for decades and decades and decades. And we developed a little bit of capability of dealing with it.

Andrew Brill 30:46
So when it comes to interest rates, you’re not really I don’t want to say worry about interest rates, but you don’t worry about interest rates you do what you need to do. And interest rates are what they are, right? If that’s what it seems, what you’re saying is like, Look, if you can afford the interest rate, you’d do what you need to do buy the house, rent the house, whatever it is, don’t worry that much about the interest rate.

Brad Case 31:06
Yeah, and I’m trying to predict changes in interest rates, there are people who make a lot of money trying and failing to predict what’s going to happen to interest rates. So yeah, make the decisions, the best way you can, with interest rates, where they are with your income, where it is with, you know, your credit card debt, where it is, and deal with the situations that you have right now. When, like in my business, you know, we develop housing, rental housing communities. And if something looks good, because interest rates are close to zero, and suddenly they don’t look good, because interest rates are more like 5%, then we shouldn’t be doing that. And the problem is that when interest rates are zero, there are some people who say, Well, alright, I don’t have all the T’s crossed and all the i’s dotted, but interest rates are so low. Let me just charge ahead as quickly as I can right now. That’s how you get in trouble. Don’t charge ahead, say thinking to yourself, well, things are great right now. And I’m not talking to just about developers, I’m talking about individuals at all, don’t charge a head saying, well, things look good right now. So let let me, let me just hope that they don’t get worse. They may get it set yourself out. So you can deal with whatever comes

Andrew Brill 32:28
That’s a great perspective, because so many of us, we look, it’s all over the news. It’s all on the financial news, interest rates, interest rates, interest rates, but who cares, right? You’re almost like, it’s almost like you’re saying, it just doesn’t matter. Look at yourself and what you can do with what you’ve got.

Brad Case 32:46
Yeah I mean, obviously, it matters a lot. I mean, to my company that matters a lot in terms of how much money we make. But we have to make the decisions that make sense regardless. And if you’re in business, because interest rates are low, think about whether you should be investments. If you’re taking a big vacation, because your credit card interest rate is low. Think about not taking that vacation. If you’re thinking about buying a car, because you currently have a home equity line of credit with a low interest rate. Think about not buying that car, get yourself ready for the things that can happen in the future.

Andrew Brill 33:24
It’s all about perspective. So what are we? Where are we with green buildings and sustainable stuff like that? It seems that a lot of the country is pushing towards sustainability. That’s got to affect prices at some point, because you would think building, those types of houses are more expensive.

Brad Case 33:46
Yeah, there’s a lot of there’s a lot of work that we can still do to make every aspect of the economy more sustainable. And I hope we do. Part of the problem is that we haven’t really reached a consensus on what it means to be sustainable. I’ll give you an example. For a long time, there have been you know, things like you know, gold and silver and platinum ratings from LEED. Well, you see that a lot with the office buildings, maybe hotels. You don’t see it a lot with rental housing communities. And you know why? Because a lot of the people who are very concerned with LEED certification, also don’t think that people should be able to smoke right? So you have to say no smoking to get LEED certification and I’m I’m generalizing here. So you know, don’t say already this this piece wasn’t accurate, but there there are plenty of rent, housing communities that are non smoking, if you want to look work in a nonce are living in Onslow. keybase great look for that. People are willing to pay extra to be in US smoke free rental housing community, that’s great. But if you’re saying, all right, we only care about sustainability. If you also ban everybody from smoking, then we’ve got a problem. Because we have a situation where people have not reached consensus on what the goal is. If a goal is to reduce greenhouse gases, great, make that the goal. If the goal is to stop people from smoking, great, make that the goal. But don’t shoot Don’t, don’t like try to get consensus that one of those is important, and then try to slip in the other as your hidden goal that you individually want to see achieved at the same time. There’s a there’s a lot that we can do. But there’s a lot of conversation that we as a society have to have, so that we agree on what we actually want to accomplish.

Andrew Brill 35:57
Gotcha. So if you had extra money right now, are you putting into a housing ETF like a middleburgh? Communities? Or are you putting into building products ETF?

Brad Case 36:06
So I’ve done both? I guess right now, my slant is really toward rental housing ETFs, so ETFs that buy stock in companies that provide apartments or that that rent out apartments or single family rental communities. And the reason that I say that is that I think that the values of those assets have gone down too much, because of the increase in interest rates, there’s actually a mistake that people make, they think that real estate is like a bond. And when interest rates go off, the value of a bond goes down. And so therefore they think the same thing is true for real estate. And it’s, then the reason is this with a bond. It’s a debt instrument, there’s a contractual set of set of income returns, and you’re gonna get those income returns pretty much regardless of the state of the economy. Real Estate, though, does better when the economy does better. So if you think about why interest rates went up, they went up because the economy was doing too strongly. That’s good for real estate. So the idea that the value of real estate should go down, because the interest rates go up. Well, that’d be great if interest rates were going up, despite weakness in the economy, but interest rates go up because of strength in the economy, that makes real estate a better investment. And so that’s why I invest more heavily right now. In in companies that provide rental housing, not not developers so much as companies that own and manage rental housing communities.

Andrew Brill 37:59
So we all know the American dream is to own a home. Gen Z. Right.

Brad Case 38:04
I think that’s a stupid dream.

Andrew Brill 38:06
Okay. I’ve heard others say the same thing. But we have heard that, but Gen Z people are, you know, running around saying I’ll never be able to afford a home, I’ll never be able to get a down payment on a home. What do you say to Gen Z, other than go rent a home if they really want to buy?

Speaker 1 38:27
Well, the first thing I say is don’t get watching television programs about how about people who live in really expensive homes and saying, Alright, I’m 26 years old, it’s time to mean for me to find my dream. I remember years ago, there was a friend of mine who was about 26 and said he was he was shopping for a car and she was gonna get her dream car. You know, wouldn’t you get your dream car, it’s when you’re 50. It’s when you’re finished college. Same thing with a dream home, get a place to live. Get a place to live that makes it easy for you to get a good job. And a wet because you have a good job, you’ll be able to set aside the money. And that will enable you to get ready to pay your kids college tuition bills that will also get get you ready to ready for retirement, when those are all set. Now think about whether it’s time to to invest in a house or to buy a house. If you’re going to buy a house and you haven’t yet sort of finished preparing for your kids college education and finished preparing for your retirement, then make it a really small one. But probably more sensible to to rent to get a place that you are renting and that enables you to get a good job and build up your your your wealth in the stock market in the bond market. Before you think about building up your wealth by doing something as risky as buying a house

Andrew Brill 40:00
But where can I find the Brad Case manual to financial success? Because that’s exactly what I just got. And it’s phenomenal.

Brad Case 40:09
Yeah, you know, I, I do I do publish things on the company’s website Middleburgcommunities.com, at the slash research page, but most of those are not really for individuals. However, one thing that’s kind of interesting, there is a quiet paper where I asked no question, is it better to rent or to own? And it comes out? The answer is, it depends. So, so no one has to know any more than that final conclusion. It’s not clear whether it’s going to be better to rent or to own. And anyone who tells you that it is clear, they haven’t thought about it carefully enough. But I also put a lot of things on LinkedIn, and including videos. And so I’ll be I’ll be I’ll be posting more discussions of the overall economy and the housing market and what it means for investing and all that sort of stuff.

Andrew Brill 41:01
Last question, are we close to using cryptocurrency to buy homes or rent homes?

Brad Case 41:07
I hope we never do something so stupid. Cryptocurrency has never been about anything other than enabling people to commit fraud. So I hope that we don’t start using using fraud to make get it into an asset that’s as risky as homeownership. It’s hard enough when we’re using cash, though, let’s not start start doing something as stupid as that.

Andrew Brill 41:37
So Brad, is LinkedIn where people can usually find you or is there other social media where people can find you?

Brad Case 41:43
So I am out to start posting things on Tiktok. But most of what I have posted to date has been on LinkedIn. So just look for Brad Case comma Ph. D. comma, CFA, comma, CAIA. There are not a lot of people who are going to have a handle like that, especially on TikTok

Andrew Brill 42:04
That’s right. That’s right. Well, Brad, thank you so much for joining me. I really appreciate it. It’s been educational for me, and I hope it’s been educational for our viewers as well.

Brad Case 42:13
I hope it’s been entertaining too. Absolutely.

Andrew Brill 42:17
Absolutely. And I hope you come on again soon.

Brad Case 42:20
It’s good to talk again.

Andrew Brill 42:22
All right, that’s a wrap up another discussion here on Wealthion. Thank you for joining us. If you need help being financially resilient, please head over to Wealthion.com Sign up for a free no obligation consultation from one of our vetted registered investment advisors and remember to follow us on social media for the latest news and information to help you invest wisely. Thank you for watching, and until next time, stay informed, stay empowered, and may your investments flourish.