First-Time Buyers Are Making This One Huge Mistake

Is real estate investing still a reliable path to wealth? Stop viewing buying a home as a guaranteed ticket to riches and avoid financial strain.

This discussion challenges the outdated belief that real estate is an automatic wealth builder. We break down why the current real estate market requires a more cautious approach and why purchasing property solely for investment potential can backfire if your finances are already stretched thin. If you are questioning if real estate is a good investment right now, this honest assessment provides the perspective you need to make smarter financial decisions.

• real estate returns driven more by macro forces than most people admit
• using a 50/30/20 framework to think about macro, property type, and deal selection
• first-time homebuyer decision anchored on mobility and a realistic 3 to 5 year timeline
• why renting can beat buying when interest dominates the mortgage payment
• hidden ownership costs beyond principal and interest, including HOA, insurance, taxes, repairs
• what happened when rental supply rose as mortgage rates surged, and why rents hit a ceiling
• buying for community, schools, stability, and predictability versus buying for investment alpha
• why “get rich in real estate” advice is outdated in a high-rate affordability-stretched market
• refinance risks, amortization schedules, and how lower payments can mean higher lifetime interest
• cash-buyer share, split-market pricing, and why days-on-market tells a truer story than hype
• inventory, absorption rate, and the gap between pending sales and closed volume
• seller anchoring bias, the myth that real estate never goes down, and how losses really happen
• local economy concentration risk in growth-dependent areas and why diversification matters

Find Du Charme Wealth Management here:
https://ducharmewealth.com

Phone: 
(435) 288-3396

Find Robert Macfarlane here:
https://www.realtor.com/realestateagents/583655fa34e2ea0001aebd05


DISCLAIMER:
Information presented on this program is believed to be factual and up-to-date, but we do not guarantee its accuracy, and it should not be regarded as a complete analysis of the subjects discussed. Discussions and answers to questions do not involve the rendering of personalized investment advice, but are limited to the dissemination of general information. A professional advisor should be consulted before implementing any of the options presented. Encompass More Asset Management LLC is a registered investment adviser with the U.S. Securities and Exchange Commission (SEC) and only transacts business in states where it is properly registered, or is excluded or exempted from registration requirements.

0:00 Intro and welcome
6:20 First-Time Buyer Reality Check
9:36 When Renting Beats Buying
12:04 Rent Supply Surge And Wage Limits
20:32 Lifestyle Value Versus Investment Return
34:14 Refinance Traps And Amortization Math
38:46 Cash Buyers And Market Stability
44:27 Inventory Levels And True Demand
53:25 Anchoring Bias And Real Estate Losses
1:01:08 Local Economy Risk In Growth Towns
1:08:31 Animal Spirits From SpaceX Mania
1:14:32 Find Your Edge Then Wrap

Transcript

SPEAKER_03 0:00

When you talk about real estate as a pure investment, to me the data's pretty compelling that it's not as anywhere near as enticing or exciting as people want it to be.

SPEAKER_02 0:08

All the stuff you find about getting, you know, rich in real estate and investing your way into financial freedom through real estate, all that stuff's old. It's it's too old.

SPEAKER_03 0:17

If you're buying a home because you think it's your ticket to wealth, but you're gonna be a house broke over it, it might not be worth it.

SPEAKER_01 0:22

Information presented on this program is believed to be factual and up to date, but we do not guarantee its accuracy and it should not be regarded as complete analysis of the subjects discussed. Discussions and answers to questions do not involve the rendering of personalized investment advice, but are limited to the dissemination of general information. A professional advisor should be consulted before implementing any of the options presented. Encompass More Asset Management LLC is a registered investment advisor with the U.S. Securities and Exchange Commission and only transacts business in states where it is properly registered or is excluded or exempted from registration requirements.

SPEAKER_03 0:53

We're here today to talk about whether or not they're gonna build houses in space. Yeah. Yeah. Uh maybe for robots. Yeah. Uh totally kidding. Look, uh, we're recording this. This SpaceX IPO just happened. Um, I am joined in the studio today by Rob McFarland. He is a uh a realtor here in southern Utah, uh, good friend of mine. Uh and uh all around uh a good good resource I utilize on trying to understand the real estate market um that we're in here locally. Now, uh as we hop into this conversation, like quick reminder, um real estate is really quite idiosyncratic, but there's consistency somewhat across markets because of the the macro component, right? So just like if you start talking about the stock market, any one particular stock could be doing good or bad. Hey, any any particular market or house or subdivision or development could be, you know, well or not well, right? Yeah. Um uh so if we talk about St. George today, it's kind of like talking about maybe just a subsector of the stock market, right? Um, so it's not a a perfect comparison to any market that any any listener might be in. Um, but there's gonna be some relative comparison, right? There's there's probably something to to glean for most markets, and then you just have to decipher and distill down that last kind of final leg into like your market wherever you're at, right? Um so that's all to say that A Rob, we don't expect you to be uh expert or uh you know deeply knowledgeable of every uh you know different market in the US for real estate, right? I mean, there's 50 states, um, multiple large metros in each one, yeah, plus all the suburbs and rural areas.

SPEAKER_02 2:38

Yeah, I mean, real estate even locally is down to the neighborhood, just like you were saying. Yeah. So it it gets it is a lot like the stock market in that way. It's like you could talk about one subset, you know, commodities, and then each individual commodity is going to impact differently into that same market, right? Yeah.

SPEAKER_03 2:55

I mean, could for commodities in the stock market, it's two different things. But right.

SPEAKER_02 2:58

That's what I'm saying, though, is like the stock market, you have commodities, you have derivatives, you have all these other different, you know, subsets of investing profiles. In a neighborhood, you have, you know, short-term rental neighborhoods, you have retiree neighborhoods, you have first-time home buyer neighborhoods.

SPEAKER_03 3:12

Well, there's a there, you know, Stanley Drunken Miller, he's a pretty famous investor, and he's got a he kind of says, he's got a quote, um, look, like when you make an investment, 50% of the return on that investment is going to be the macro environment, right? Um, 30% of it is gonna be the industry group, and 20% is gonna be the alpha, you know, potentially uh potential alpha generated from like picking the best stock, right? So what it means is like, so you know, what he says is like, look, if you buy airline stocks, you're making a huge bet on the price of oil, right? There's a big embedded price or bet on the the price of oil if you're buying airline stocks. So 50% of the return is gonna be based on the oil driver, right? And then 30% of the return is gonna be attributable to just like whether or not airline stocks as a whole did well, right? And then 20% is gonna be whether you bought, you know, Southwest or United or right. Um how would that translate to real estate? How could you like so in in real estate, like listen, if interest rates go on mortgages to 10%, I don't care how great you think your market is, right? Right. Like you're making a you're taking it the macro bet is that like the economy stays good, generally speaking, right? Um, that interest rates stay stable. Um now it could be up or down slightly, but like stability is gonna be probably most beneficial. Um uh your uh industry group, right, is gonna be more like um something like, hey, are you getting into storage right now? Or are you dealing with you know residential or new development or land? Um, are you dealing with single family homes? Are you dealing with um you know convertible properties, right? Where you're buying a property and turning it into duplex, right? Like all of those things are different. So industry group would be like that.

SPEAKER_02 4:55

So like commercial, industrial, residential. Okay.

SPEAKER_03 4:59

Yep. And then the last 20% is like, you know, house A or house B. Right. That's you know, like, hey, I can buy, you know, this property on this side of town, and it's got these these types of you know, aspects or attributes or features, and this is what I think the rent potential is and the growth potential is over time, or I can buy a house on the other side of town or a different neighborhood over or whatever. And the deal's slightly different, right? Yeah, and picking between that that final stage. And so I think like the conversation that I really want to have when I'm thinking through this stuff is like I would rather engage with uh, you know, a local realtor in whatever market you're you're dealing with, or real estate agent, um, to find that last 20%, right? Like, hey, building on this side of town or that side of town, right? And and you're looking for them, that's where that local expertise is always gonna, in my opinion, really, or local professionalism rather, I think is what I should say, um, and that depth of knowledge in in the local market, that's where that's gonna come into play. But first, you know, what you have to do before you get to that is like what industry group, right? So residential or commercial or whatever you want to get into, and and prior to that is like what's the interest rate environment, what's the general macro on this whole thing? Why am I even getting into the asset class as a whole? So um, you know, I will now take this back to like the question I always still get or see a lot is hey, like, should I buy a house? Yeah. Rob, you're a realtor to a guy with a hammer, everything looks like a nail. Yeah. But give us your give us give us the real deal. So what are you thinking? How's the housing market looking for somebody looking to buy a home?

SPEAKER_02 6:32

I actually sat down with a first-time home buyer just last week, specifically with this question, is the key discovery question he had in mind. He was sending me um, you know, a couple options that he was seeing on Zillow. He's like, hey, I didn't even think I could buy something under 300,000. What do you think of these options? So let's let's sit down and chat. And so when he came in, that was the main question I wanted to flush out was should he even buy a house right now or not? Right? His he's living in a rental, $1,300 a month, fairly inexpensive for just him and his wife, no kids. Um it's a little bit further out of town than what he wants to be, but it's it's a good value and it's stable. Like he did, he's not worried about the landlord, you know, bumping his rent and deciding not to, yeah, selling the place, things like that, right? And so the the main question I asked him, I said, where do you see yourself being in the next three to five years? Do you see yourself in southern Utah or do you see yourself potentially having opportunities elsewhere? Like, are you mobile or do you feel like, hey, this is where I'm gonna plant my family and go? And that was a question he hadn't really considered. And it was something that another client of mine who's going to sell her place, is she didn't consider that back in 2024 when she bought. She immediately met somebody, she immediately like six months later got married, and then they moved. They moved up to Wyoming. And she's kept the place that she owned as a rental, but it was cost it's costing her 700 bucks a month to supplement because the rental cost doesn't match what the mortgage is. And now they're at a point where they're gonna have a baby and that now they want to sell it. And we're two years later, and we're hoping they don't have to sign a check and pay pay money to be able to sell that to the next buyer based on the market value, right? Yeah. And so two years later, right? Almost two years to the to the month, right? And so thinking thinking through that scenario for that first-time home buyer, I think is really important because if you look at mortgage interest rates, like you said, is there stability there? Um, can you afford a payment? What's the alternative to rent? In a lot of situations for that first-time homebuyer, if they don't have a big chunk down to where they can lower their monthly payment or start eating up the principal payment to where you do it, you put it on a spreadsheet, you know, they're paying rent less than what the principal, you know, less than what the interest cost would be on the mortgage. They're actually giving more to the bank than they would the landlord and not really building any equity, except for the within that first five years, they're barely building up any equity. And so could you set aside that money, invest it into something else a little bit differently? Can you save up some money to be able to, when you are in a position to buy something, the payment makes sense and you're not you're not putting your money away into an investment that ultimately you're not going to stay in, right? So that's the first-time home buyer. I mean, that's the first first thought I have for them.

SPEAKER_03 9:35

I think if I just can can I like try to add some numbers to what you just said in this picture, I'm wondering, I'm following you right. So essentially what you're saying is like, hey, the rental market has actually come become so disconnected from the the buying market, right? That costs cost own a home for sure. Right. Every market's a little different. I think nationally, a lot of data. Yeah, I think a lot of markets are going to be in a similar dynamic, not every single one of them, but a lot of them, this is gonna probably at least resonate with the service. Like it's just, and that's to say, look, it's a lot cheaper to rent a house than it is to buy the same house, right? Yeah, but what you're saying is, hey, if it if it costs you $3,000 a month to buy the house and a mortgage payment, right? And you look at that principal interest payment on a monthly basis, and $2,400 of it is going to interest, and you can rent the place for $1,800. Like where in the past, everyone said, hey, rent is just throwing your money out, rent is throwing your money away with rent's throwing your money away. It's like, well, like you're paying the bank more in interest than you would in just paying the landlord, right? So just pay the landlord, save yourself the $600 in interest.

SPEAKER_02 10:41

Yeah, if you can make that pay payment anyway, then that money's just going into your pocket. Correct. Right. And you're not paying taxes and insurance and repair and maintenance and some of these other things that come up.

SPEAKER_03 10:49

I'd argue you pay those as like indirect costs always, anyways, right? To a certain extent, those costs are generally going to be passed through.

SPEAKER_02 10:56

Well, what I'm saying is that when you put it on the calculator though, yeah, you're looking at the mortgage and the interest. You're a lot of times you're not looking at, oh, there's this HOA fee, oh, there's this fee, oh, there's this fee. And so when you're just looking at it as the principal and interest, that's one portion. Yeah. And that might not line up. But did you factor in all these extra costs on top of it? Right. And when you factor all those in, you're right. You're paying that true payment alternately for the rent.

SPEAKER_03 11:20

Yeah, true payment. Like how much is actually going to paying down your your equity? And is it is it enough that it actually are you actually paying something down, or are you just like paying for the opportunity to say you're paying something down? Right. Right. Exactly. Um, no, that's it's like a really interesting point. Um, what's the movement of the market, generally speaking? I mean uh, like I just keep, you know, hearing people say, oh, like, and and listen, I actually have a lot of the conversations from the angle of like I have to do something to help my kids get into a home. Because if I if I don't do something here, they'll never be able to get into a home, right? Like as if the market is running away from them.

SPEAKER_02 11:56

Yeah. I would say that the the market's not necessarily running away from them. I was I'll I'll take a step back too, and and I think we're in this weird moment of time. This is in Washington County, and this is generally true of Utah. And so I'd be curious what other states, so I think jumping in the comments and and saying, hey, this is kind of similar to what's happening in in my state, is that when we started uh approaching, you know, max alpha in home value appreciation, right? Back 20 late 2021, into 2022. So like basically a 12-month period from 21 to 22, home values just was a rocket ship. At that same time, as interest rates started going up, interest rates went up so quickly. At the same time, there was a bunch of new investment into rentals because the conversation around affordability and providing smaller investment properties and rental options, right? Just housing starts, there was this big push from 2018 really into 2020. There was a big push for developers and everybody to build more rentable places. And when that boom happened, a lot of people picked up a lot of those rentals. So we had this huge supply increase in rental options, whether it was apartment complexes, but also duplexes and smaller type uh properties or rentals could go up. So we had this huge bump in rental supply, and then rent interest rates went up. And so you had this crossover where rents actually went down while mortgage rates went up significantly. And so now with rates not really um changing all that much since about 20. I mean, it's gone up and down, you know, up to seven and down to down to five, nine, nine, I think is probably one of the lowest spots it's been over the last few years. But rents have only now just start to started to come back up. So from 25 to 26, in 2025 to 2026 in Utah, it was the first year in the last three, in the previous three years where rents actually started to go back up. They went down every single year from 22 on to 25. And so that's that weird moment of time where that norm those two things don't normally happen at the exact same time, where how the cost of living in a house and the mortgages go up so fast and rents actually came down. So there's weird intersections. So as an investment, you know, we think, oh, well, it is cheaper to rent. And it's for a small period of time because eventually rents will catch up, right? We all know that rents eventually can't come up. Yeah, I think so. I think they will. I think about a couple of- I mean, they've already started to recover. Uh rents have already started to come up. And if landlords have extra overarching costs, whether it's insurance, whether it's taxes, whether it's the property values in general, they're going to want to recoup some of that delta.

SPEAKER_03 14:29

I think what I'm gonna say is like, yes, they they want to. And if the market is strong, they can. The problem is like, do they have the pricing power? And the reality is on a macro level, so when we go back to the macro level, affordability has become so stretched. Real wage growth is actually contracted post-COVID. So people en masse are actually earning less money than they did before COVID. On a nominal level, they might make more, but on a real basis adjusted for inflation, it's actually less. And index of housing, it's actually significantly less. So affordability is like really, really stretched. And what you can't do is you can't just say, well, you know what, I had to fix this house, or my taxes went up, or my insurance went up, or the the price of my the value of my home went up. So like your rent's going up. Like you can do it for a certain period. Um, and if people are having real wage growth, then like you can potentially pass some of that on. Um, certainly if they're having nominal wage growth, you can pass some of that on. But there's a limit to how much they can because at a certain point, people just say, like, look, I was renting because I couldn't buy. Now I just can't rent, right? Like, and and you and I both know that people don't just say, well, you know, rent's just gone up, I guess I just won't eat. Right. Like it's it's a it's it is it's a it's a necessity, but it's actually one of the easier necessities to try to combine with another family or you know, group of families as a resource, right? So if you look outside the US, a lot of uh uh multi-generational families, you know, live in the same house, right? I think that's like culturally um more normal outside the US.

SPEAKER_02 16:00

That's just you know, that's so you're you're saying that you don't necessarily think that rents are going to continue to climb. You think that there's a ceiling?

SPEAKER_03 16:06

I I think that there's a significant headwind. I think on a real basis, there's definitely a a significant headwind, right? On a nominal basis, maybe they start to climb um slightly, but I I only think that comes if there's high nominal growth and there's significant, you know, uh wage growth too.

SPEAKER_02 16:23

Do you think that gap though between owning and renting is going to shrink over the the next five years? Or do you think it's gonna stay the same, widen? What do you what do you think that's gonna happen? What would you be your anticipation for that?

SPEAKER_03 16:37

Um I don't know that I have a I don't I don't really feel like I have a crystal ball on this. Um so I don't want to get out of my skis on uh making a definitive prediction, so to speak.

SPEAKER_02 16:47

I think that in general, what I'm saying, just just to that point, it's it's hard to predict. It's hard to predict, but if we look at home values decreased about 17%, this is Washington County, decreased about 17% from the peak in April of 2022 until about today. So they had pulled back about 17% from the peak. Yeah, but now we're starting to see it climb at a 3% rate based off the last two years of data, right? It's like we've been up about 2 to 3% on the average price sale over the last two years. Is it it is still climbing the average price point? The median has stayed roughly the same. I think right now we're over year over year, we're up. But but you and I both know that average, the average price is is you know, if you go look down like in our community here, if you go look down by like Crimson Cliffs High School, man, there's yeah, the average price of the average price is the average price year over year is up 11%, right? But the median is only up 3.8. And so I like to look at the median, but even at 3.8 as the median price sale goes continues to climb and has started continuing to climb after the initial pullback, is that if home values are increasing, uh it seems to me that it would be um likely that rent values are going to continue to climb as well.

SPEAKER_03 18:05

But you have to ask yourself, is that on like what really matters is a real a real basis, not a nominal basis? So if home values are climbing at 3.8% and inflation's climbing at four, your home didn't go up in value at all. In fact, your home went down in value because it's a depreciating asset. So the value of your structure became less and less attractive. Yeah, fair enough. Um and the rentability of that, right? Like what demands, you know, what commands a higher rent? Uh a brand new house or a house built in the 70s?

SPEAKER_02 18:34

Yeah.

SPEAKER_03 18:34

Right. Like obviously, you know, extremes for illustration, but um if year over year, like if your home is depreciating in value as a structure and it it just going up with an, you know, it's going up but dragging trailing inflation, I guess what I'm saying is like, yeah, rent could go up slightly, but is rent gonna go up higher? Like is it gonna go faster than inflation? And and and that's what would cause a real squeeze, right? That's what would close the gap. I think the more that rents go up less than inflation, naturally causes that gap of rent to own to close somewhat naturally over time. Right.

SPEAKER_02 19:16

So I guess going back to your question is I gotta do something as a parent to be able to help my kid get into a home because they won't be able to because it's running away. I think, I think the general conversation is I don't think it's running away. I don't I don't think we've seen with this median price values increasing here in Washington County, I don't I don't think it's running away at this point. It seems to be moving at the pace of where wages are going and where affordability maxes out, right? Which is the interest rates that we have, the average wages, and the median value of the home, right? So that affordability index that seems to be where the market is climbing at that same rate. And so it it's it's time on task over time, right? If you're wanting to help your kid get into a home, it's getting them into a position where they have a steady job where their wages are affordable. And then are they going to stay there for a meaningful amount of time? Because if it's I'm just gonna get into the home to say I have a home for two years, it needs to be looked at from a long-term perspective. It's a long hold perspective. Unlike basically from 2018 to 2010, it was this mad scramble because of the way interest rates were.

SPEAKER_03 20:28

Yeah, like you said something interesting there, like it has to be a long-term hold perspective. Yeah. Um, one of the things I remind listeners really quick is um it's always easy to have that that quip or that notion in like at the entry point, right? It's always excited to be easy. Hey, I'm a I'm a 30-year investor, hey, I'm gonna, yeah, I'll live in this home for 30 years. A couple of things. You have to remember life happens in the meantime, right? So like just life circumstances change, job changes, family circumstances change. Um the next component is like, hey, if you're parking your capital in real estate, it's actually a very unproductive use of capital without the use of leverage, right? So like we just talked about the price at home going up 3.8%. So I think that's the median risk. The median, right? And you know, around here, if you get a 3% cap rate on a residential deal, it's like incredible. So you're talking a six, you know, six point eight percent nominal return, that's like not exactly a great return, right? There's I mean first perspective, you can buy mortgage bonds that pay six, you know, mortgage bonds currently yield about six, six and a half. Okay. Um and uh anyway, so there's like it obviously it depends what your mandates are, why you buy something, but you have to then use a leverage if you want to get this like effect of like, hey, building a home is gonna build wealth for me or my kids, or like it's gonna it's gonna run away from us if you know if we don't do this. Um look you have to use a leverage, and now what that means is like you have a cost of carry. Okay. That's quite significant, right? With real estate, obviously you always have some kind of cost of carry because of insurance and taxes and maintenance. But you put that mortgage payment on, you have a debt obligation, right? If something happens in the meantime, right, that you can't meet the obligation of the mortgage, and the it's one of those things real estate becomes all of a sudden it's it's it's everything or nothing, right? Um and so if you say, hey, I'm gonna be, you know, I'm gonna I'm gonna hold it for the long term, you have to make sure that you factor your entire financial life around the ability to actually hold it for the long term.

SPEAKER_02 22:36

Yeah, for sure, right? Yeah, I would agree with that 100%. And really it's there's the easy, easy thing to say it's a 30, I'm I'm in this at a 30-year clip, but what your return is, if you're looking at it as an investment versus I'm looking at it as a place to where I can build roots and I can grow a family and I want to get into the community and the neighborhood and yeah, and all of those things that come along with that lifestyle choice, yep, that those are two different perspectives.

SPEAKER_03 23:06

Right. Well, and I think that's uh you that's worth touching on, right? So maybe exp expand more on that and what you think like the intangibles are because I think there is when you talk about real estate as a pure investment, to me, the data is pretty compelling, that it's not as anywhere near as enticing or exciting as people want it to be. Recency bias tells us it's very exciting, right? Um, but investment returns aren't built upon what has happened the last 15 or 18 years, right? Right. Um, it's based upon what happens the next 15 or 18 years. Right. Um, and uh and so I think from a pure investment perspective, there's a number of headwinds to uh real estate, especially in the in the uh residential space, right? Yeah. Um but there's other reasons to buy homes. So hit us with it.

SPEAKER_02 23:56

Like what's your yeah, I mean, I think I think if you're going if you're going to want to if your your idea of the American dream, right, or if you're you're thinking about starting a family or you're thinking about I'm I'm a move up buyer, like for my wife and I, for an example, we bought two investment properties, one in 2020, one in 2016. Uh the intention was to live in it for a few years and then turn it into rental and have cash flow because the math made sense in both those two windows. And so at this point, we're actually stuck in that second investment property because we watched interest rates go up and home values had gone up so high to where the trade-off for me wasn't, yeah, I could turn that into a rental, but now my mortgage cost is three, four times more than what I'm paying right now. And do I really want to trade off, you know, the lifestyle that I have right now for a house that looks a specific way, that's in a specific neighborhood. And so the the conversation my wife and I are always kicking around is you know, we have low maintenance, we have a low mortgage payment, we have, you know, everything is inexpensive for us at this in this investment phase. I could rent it out in an immediately cash flow after all those expenses are done. And what's the alternative? If I go and am house poor and and now I'm I spend all my time at the house, right? We get a house with a yard, and now I can't can't afford the landscaper. So I'm gonna do the landscaping on the weekends, and we can't go do this thing, we can't travel, and we can't do these things, right? And so it's the trade-off of the lifestyle for that move up buyer. And what is that trade-off? Can I expect to make more money later on to where now I'm not house poor and we can continue to go back to those things because I invested today, where home values, if they are continuing to climb, is it just going to be more expensive for me to buy a year from now than it is today? Right. Nobody has that crystal ball, but we're gambling on that, that trade-off, right? And so, you know, in those, in those scenarios, first-time home buyer and for that move up buyer, the the function of your lifestyle, what you're choosing is important. It's something there's some calculus in that that I think everybody should, you know, consider. And so investing in a community, having a neighborhood, being close to um schools, you know, I think about this all the time. It's like if I lived down the street uh growing up, I I could walk to school, right? Uh Jeff Watkins, uh business partner of mine, you know, Jeff, he grew up like half a block away from his school and he loved it. He was always, he he never was in the car, right? He was always riding his bike to school or riding to and from practice and all these other things. And so the lifestyle for him as a kid was similar to mine, where my kids now, it's we're about uh two miles from the school, right? And they're they're little, and so is it a little bit more labor intensive? Does it take me 30 minutes to get over to Walmart and to to go shopping? And is it's gonna it's gonna have all those functions into it, and so that's the trade-off. And location seems to be the number one driver of values in Washington County. Um, Washington City has just overtaken St. George City in as the highest I average price point. A lot of it is because of some of the McMansions out in the fields and you know, these million well, a lot of those are out in St.

SPEAKER_03 27:10

George, actually.

SPEAKER_02 27:11

Yeah, uh the vast majority of them we've seen from the data is in Washington, in the Washington City limits, right? And it goes all over, all over the the Washington City side, you know, it's not just in one area, right? But Washington Fields in particular has a lot of really big houses, 6,000 to 10,000 square foot homes on one to one and a half acre lots, half acre lots, right? These massive homes, and they're selling and they're continuing to sell. So the average price point went up there, but it's because of the location. Location seems to be the biggest driver. First, the school ratings for the Crimson School District um outpace the other school districts, uh, the shopping and the development uh opportunities that are out there on the commercial side have been long time coming, but now coming to fruition. Um, and so there's a lot of value that buyers are putting into those areas. And so the lifestyle of your neighborhood seems to be the biggest driver of where home values are at, right? And so if I, you know, want to be on the outskirts of town, that's a different lifestyle than if I'm in the thick of, you know, suburbia hell, as I call it, right? Some people really want that, right? It's you know, there's there's some value, there's some value in that, right? And having kids in the neighborhood, do I not want kids in the neighborhood? Um, you know, all those things come into play on what are the values of the house outside of if I'm in a rental, what area of town am I in, right? The the fields, there's not rentals out there. I mean, there's a few, but you're gonna be paying even more of a premium to be in a single family house than if you were in a townhome, you know, in Long Valley or out in the outskirts, Santa Clara or somebody else, somewhere else, you know, your your lifestyle is going to be different when you're renting in these different socio and economical areas. And it's just the it's the byproduct of the way cities develop and the way development happens.

SPEAKER_03 28:58

Sure. Um I think all all of that to say if you have stability in your life, yeah, you're ready, willing, and able to buy a home. It's not a finance, you're not stretched, right? Like you know, you're saying, hey, the trade-off might not be worth it because we'd be so stretched compared to, you know, so i.e. just like, hey, we could move, we'd be housebroke, right? I don't want to be housebroke. Right. Okay. So if you're buying a home because you think it's your ticket to wealth, but you're gonna be housebroke over it, it might not be worth it. If you can comfortably afford the mortgage on a home that meets your needs, right? And you have that stability in your life, right? Your income is stable, your career is stable, you're gonna continue to live in St. George, right? Or whatever market you buy in, right? Um is that's all stable. Um your uh, you know, personal family planning is somewhat like stable. You know, if you're in the thick of your three kids deep and you're planning to have 12, like that's not maybe stable, right? Like, you know, look at if all those things are stable, then you know, like you can buy a home. And even if it's not the most uh official use of capital over the next five or ten years from a math perspective, sometimes the intangibles of having that stability in your life for your family um can be uh valuable as well, right? Yeah. I think that's what really what you're saying. Yeah. You have to make sure that what you're buying meets, you know, your lifestyle, your goals, your um, you know, what you're looking for long term. And I I think the overarching thing is don't go housebroke over it, right? Right. If you have to go housebroke over buying a house, then like it's not a market that is going to run away from you, you know, spend an extra year or two getting your finances and an old you know, in order, adjusting your lifestyle appropriately. Um I almost think of sometimes there's like the old, the old idea, like if you're if you're if you're wanting to buy a new car, right? You have a paid-off car and you're like, oh, I could buy, I could buy and finance a new car, $600 a month, right? Just like, hey, make that $600 payment to yourself. Like start making it to yourself. See how that feels for, you know, six months or a year. You know, worst case, you get to the end and you've got, you know, $7,200 saved.

SPEAKER_00 31:15

Yeah.

SPEAKER_02 31:16

Um, and then that goes back to the conversation I had with that first-time home buyer, is that him and his wife have saved up about $21,000 over the just the last year.

SPEAKER_00 31:25

Yeah.

SPEAKER_02 31:26

And it's because, because of their rent, and they've already proven, and this is what I told him, I said, you've already proven that you can set the money aside instead of spending it. You can continue to make this payment, which he's comfortable with. He's like, Well, I can make this payment on you know, uh a mortgage payment, and I'm comfortable there because he's already paying himself that, right? He's already stacking up a savings account at a pretty good clip. So he's already proven that he can do it. And that's where the conversation ended is that you know, you're in a good position to where you could buy if you see yourself here over the long term. However, if you decide to sell in two years, what all of that work that you put into it is going to go towards commissions and costs and fees, and now you're not gonna pull any money back out of it at the end of it, right? And so, you know, if don't don't make a great investment option and turn it around and and make a mistake by, you know, showing that you can save money and build up that equity if you don't really plan on having this as an asset for long term, you know. And if it means by saving up, continuing to save up money to where you can get that payment down to where if we do want to rent it, it can cash flow or cover itself, then you know, that might be a great strategy if you're not sure you're gonna stay there over that long term. But that math, it's a big down payment nowadays.

SPEAKER_03 32:43

It's it's uh it I think if you wanted to make it really simple for yourself, right? Like it's simply asking yourself the question of like, hey, forget about what homes are gonna be worth in the future or what the price appreciation on homes is, is hey, someday I want to own a unit of shelter, right? I want to own a unit of housing simply so I can control my cost and so that I can own it, right? I want I want to have that controllability, predictability, stability in my life at some point, right? Um, so uh what's the price of a home today? What's the price of that mortgage? What's the price over time? And can I just stay in it and just make the payment every single month? Yeah. 360 payments, you know, 30 years, pay it off, done. You own one unit of housing. At that point, you almost have to ask yourself if that's your goal, anyways, which a lot of people that are buying homes it is. To what extent does it really matter if your home is worth you know, you buy a home for $500,000 a day, to what extent does it really matter that it's worth $500,000 in 30 years or $3 million in 30 years, right? Right. You just need a unit of housing. Right. What's the what's the what's the quickest way to get there, right? Yeah. Um uh a mortgage is gonna generally be one of the quicker, easier, and safer, you know, ways to to get there. Yeah. Right. Um, but it's not about projecting out where housing's gonna be the next five or 10 years. And that's why I say if things are really truly super stable, you can project out further and say, what about 30 years? I just want to just buy it, pay the mortgage off. Right. I think where a lot of people go wrong and where I've seen a lot of people come into challenges as they try to come into their retirement planning is the refinances, right? Hey, they, you know, they end up buying a boat or getting in credit card debt. So they do that, that cash out refinance, that debt consolidation refinance. Um, hey, they, you know, the rates drop a ton and so they refinance, but they don't bring, they don't match their amateurization, their current amateurization schedule. That's right. So they get to be in their 40s, they do a refinance and they restart a 30-year mortgage, going, like, look at how much cheaper my payment is.

unknown 34:45

Yeah.

SPEAKER_03 34:46

Like, yeah, and the interest rate's great, but that money that they save becomes lifestyle expense, and they don't take it and you know, say, okay, well, we dropped our payment, now we can invest more money, use market tailwinds, or invest in other instruments that pay more than our cost of interest. And so let's build up a pile of cash so we can pay the mortgage off whenever we want. Right. Right. They just go, look at how much cheaper our payment is. Well, now you're now your home's not gonna be paid off until you're 70, right? Right. Um, it's deep in, you know, that is into the years when people expect to be retired. Right. Um and so like the refinance is what catches a lot of people off guard. They just don't project out far enough the implications and navigate that correctly because it's just enticing at a certain point. Hey, I felt house broke for so long. Now I can refinance and look how much cheaper it's gonna be. Yeah. Sometimes it's like actually more expensive. But they say I've been paying all these credit card payments or boat payment or whatever, and I'm gonna just refinance and look how much my payments go down. I save all this money every month, and that's how it gets pitched to them. Um, but the reality is like, look how much money you're gonna pay in interest over the years now because you just took, you know, uh you just took a 10-year boat loan and just amortized it for 30 years. Your interest rate is two points lower, but your payment's lower because you're paying less principal. Like it's gonna take you forever to pay it now.

SPEAKER_02 36:01

Yeah. Um it's interesting because I think a lot of people they don't actually do the math. They don't actually put it down on a spreadsheet and then look at it. Yeah. You know, I I had showed, you know, my my client that I met with, I showed him the amortization schedule of, you know, an option that he felt comfortable with, and I showed him what that equity built out is over time and the amount of interest. And he had never even looked at that. Yeah. He had never even looked at that. And a lot of buyers don't even look at it until their loan disclosure, right? They're like at the finish line, and you know, they have you know, two weeks before their closing, and now they get this disclosure on the amortization schedule, and they even if they're might change their mind at that point, it's too late. You know, there there's too many things already built up to where you can't even turn around at that point.

SPEAKER_03 36:46

Well, the problem, the the problem, Rob, isn't like the the interest you pay, right? Like there's just there is a cost to borrow money. Right, true. There's nothing wrong with like when people are like, oh, that cost over 30 years is gonna be as much as the home itself.

SPEAKER_02 36:58

But the idea itself, right, is to like consider that.

SPEAKER_03 37:02

Well, yes, it's like could consider that. Um the problem is when you get too far out of whack, right? So if you know if you're paying a million dollars in in interest over time for a $500,000 house, right? Like, does that does that still work? What and and the answer might still be yes. I don't really what it comes down to is like what do you think the $500,000 house is gonna be at the end? Because if you pay back $500,000 house over 30 years pay the $500,000 off and pay a million dollars in interest, and it's worth five thousand five million dollars at the end, like it's absolutely worth it, right? Like right. Um, so what's your long-term forward-looking projections? And then does that, you know, does that cost of interest at the final valuation of the home make it upside down or not? Right. Right. Um very difficult to do because like 30 years is a little bit further beyond the horizon than I think people can accurately forecast.

SPEAKER_00 37:53

Yeah.

SPEAKER_03 37:54

Um so it it's tough, but again, if your goal for me is like if your goal is to just own a unit of housing, right? And this is what I explain to people like, hey, if you own a unit of housing at the end, right, and then you say, Well, I don't want to retire here, I want to retire somewhere else, and the market crashes. Like, yeah, but you just sell your unit of housing that likely went down somewhat similar to what the market went down, and you go and buy one more unit of housing wherever you want to land, there's probably going to be a similar cost, right? It might be plus or minus one, you know, directionally slightly, but yeah, like you know, you own a unit of housing, it goes down, you buy another unit of housing that also had gone down, right? Right. And when it goes back up, it it goes back up. So should the market go up a lot and you want to relocate, like, yep, you sell a unit of housing and you buy a unit of housing. Now there's transactional costs to that, right? And again, it's plus or minus, but broadly speaking, it's it's all the same. I think that's one of the reasons why in Washington County, and you've got the data, we've seen a lot of people like that come here and they're like cash buyers, right? Yeah. Like I was actually looking at that right now. Regardless of the interest rate activity of what's going on, high, low, whatever, they're selling, they own a property somewhere else that they're selling. Yeah, they're just selling a unit of housing and they're just coming here and just buying a unit of housing. The interest rate environment, the payment, all this nuance, like doesn't matter. They just want to own a unit of housing.

SPEAKER_02 39:11

I'd be curious what the what the different markets are outside of Washington County, uh, because it's tough, it's tough to get this data. Uh, we get it because the MLS, we record what kind of loan they got when we close out. Um, and not all MLSs do that, and it's not all public information, right? And so in Washington County, in just May, 30% of the home sales were cash. So 53% of them conventional, 11% FHA, 5% VA, one owner financing. Um, this is for single family homes, and then Utah Housing, they had one, and so which is like a FHA, you know, first-time home buyer uh loan program. And so 30, 30 percent. And if if you look back uh over the last five months of the year, it's about 26 to 27 percent. So for the first part of the year, it hovers between 25 and 30 percent. And so seeing that that amount of cash, 30% cash coming into the market, I think it seems a little bit high for the majority. You know, if you look step out macro, it's probably not that high. I think we have a lot of cash buyers because the markets that feed southern Utah are from markets where the home values are are higher than where we're at. And so they can sell something they have there that's smaller and buy something bigger here or nicer or you know, whatever the case may be if they're downsizing, whatever. Um, they have the money to be able to come in and just just buy it based off of what their appreciation was and whether it's Washington or California or even up in Salt Lake in some areas. And so there's a big amount of cash in Washington County that that eats up a lot of the market.

SPEAKER_03 40:48

Hey, it's no secret to us. We look at the demographics of this show. We know that a lot of you listening are actually other financial professionals and other investment advisors. We want to go ahead and invite you. If you're looking to do something different in your career, go ahead and reach out. We're always looking to bring on high quality people that understand how to do the planning process, align with our values, and are looking to deliver high value to their clients. Please just go ahead and reach out to us. You can get us on our website, ducharmwealth.com, and we look forward to talking to you. I think the reminder on that too is when there's not a lot of animal spirits in the market, it's it's a lot harder for a market to crash. So if if homes truly are you know being bought at th 30% of the transactions are happening in cash, that's probably a really good indication that, you know, look, the market's probably not about to run away from you.

SPEAKER_02 41:34

Yeah.

SPEAKER_03 41:35

Um, you know, there's not there's not a like there's not just incessant bidding happening, right? Flying off the shelf. No. Um but it's tough to force people out of a bunch of properties that they just don't owe anything on, right?

SPEAKER_02 41:49

Yeah. Well, it's interesting that to your point, this and this is happening in Washington County, and I I assume it's happening in other markets as well, is the homes that are priced well right out of the gate are flying off the shelf. There's a big difference between homes that are getting 99 to 100% of their asking price with almost no negotiation in the first seven to 10 days. And then there's a big discount that you're getting if you've been on the market for over 100 days. If you go over 100 days, you're getting between 92 and 95% of your asking, your original asking price. Yeah. And so that that difference is when you're priced well, buyers are paying what they see as value. And if it sits on the market, they recognize that the rest of the market has ignored it, whether it's priced well or not, and they're they're wanting a steep discount. Yeah. And so it is, it is kind of a split market in a way is that when it's priced well, it's moving very quickly. And when it's not priced well, it's getting hammered or just not selling at all. We're about uh only 75% of the homes and the listings hitting the market over the last 12 months are actually selling. They're either canceling with uh canceling or expiring off the market.

SPEAKER_03 42:55

So 25% are canceling.

SPEAKER_02 42:56

25%. Yeah, 25%, which is really similar to basically the 2020, you know, no, 2014, 2015 is kind of the last time it was is around that amount. Um, and then the market started to pick up again, you know, out of the bottom trough of the housing market collapse. Because our bottom here in Washington County was about 2011, 2012, and then it started going back up again. But the expiration, because they start they started seeing recovery, they were asking more in value than what was actually asking for, you know, what the market was willing to pay, and they were expiring over and over again. And so, yeah, only only about uh 75% of the homes are actually selling. Um, and then of the ones that are selling, when they're on the market over 120 days, they're getting hammered on price. They're getting hammered.

SPEAKER_03 43:44

Yeah, I was surprised to see. I know I recently did a home search and uh I was really surprised to see how much was on the home and like the the days on market was way more than I had. Yeah.

SPEAKER_02 43:55

Average days on market in May was 72 days. Um In April, it was 83. So we actually have increased the speed in the average days on market. And then in comparison to May of 2025, it was 76. So we've hovered right around that 70 to 80 days on market.

SPEAKER_00 44:12

Yeah.

SPEAKER_02 44:13

Um, cumulative days on market. So the total time that it sat on the MLS and ready to ready to sell.

SPEAKER_03 44:19

I think it's generally, is it, is it you think I'm misguided if I think it's kind of just like almost like a stale market? Like it's not really exciting one way or the other. Like prices aren't dropping through the floor. Um, you know, but they're not, they're not climbing. There's not a big, there's not a big demand, but there's also not a, you know, there's not a big demand to buy, but there's also not a massive demand to like sell, like where people are just like, hey, at any price, get me out of this home. I gotta sell it.

SPEAKER_02 44:43

Well, I mean, the the demand, the interesting thing is you're right on demand. The listing inventory inventory just crested up over 2,000 active homes on the market. It's 2046 as of the end of May. So it was like beginning of June. And so it fluctuates every day, right? Some homes go off the market, not on the market. Um, but it's the first time where at the beginning of the month it registered over 2,000 active listings in Washington County. This is just Washington County. So I I hold the data. You'll see a lot of different data sets out there. Uh uh, Utah Real Estate, Zillow, they'll they'll have all these different ones, but this is direct MLS direct numbers for the county only, because they'll list stuff in Iron County or up in Salt Lake on our MLS. So it's just our county. It the first time it's happened since 2011. So April of 2011 was the last time we were over 2,000 homes on the market.

SPEAKER_03 45:32

Yeah.

SPEAKER_02 45:33

And so it's interesting to see that that supply is at a really, really high level, like more so than I think most people actually realize.

SPEAKER_03 45:43

Um, yeah, it's pretty fair level. One of the things I would just like to call out though, um, you know, when I hear these stats, I always think like, okay, what's the nuance I'm missing? Um the nuance I think that's missing right here is like how many more homes are in, you know, the county than in 2011, right? Like there's a lot more homes. And so on an adjusted basis, like if you said what percentage of homes was at in the county in 2011 versus what percentage of homes is 2,000 homes in the county now, it's like a lot lower of a percentage. Does that make sense? Yeah.

SPEAKER_02 46:14

Um so but the idea that even though over that last what you know, how many years is that, right? We're at 15 years. Yep. The first time it's gone over 2,000 in 15 years of building where we've had multiple bo uh housing, you know, construction booms, like we just now, you know, have met what the highs were of 2018 and 2019 uh of the amount of new construction. You know, 2008 we were building more homes even then. So so the the thought though is that it still took 15 years of new construction for active supply to get over 2000. It's I think it's it's meaningful in a certain sense.

SPEAKER_03 46:49

It it is meaningful, but I guess what I'm saying is like the ability for that number to go much higher. Oh, yeah, is like don't price that out. Like don't or don't, you know, like hey, have a little bit of imagination here. Like just because we're like, hey, last time I got this high, that was like right near the the peak of the bottom, right? Or they're not the peak of the bottom, the peak of the bottom. No, they the peak was over 3,000.

SPEAKER_02 47:11

The the peak was over 3,000 active listings on the market, like 2008, 2009, it was over 3,000. So so we it it was falling, but the last time we were over 2,000. So I would expect 2011.

SPEAKER_03 47:23

We're accelerating into probably available inventory.

SPEAKER_02 47:25

Well essentially. So the the way we the way I look at that is the absorption rate. So how fast are homes going on the market and then coming off the market? So the the measure of supply and demand, right, as a as a as an absorption rate. And so we're sitting right at 5.64 months of inventory. So it takes 5.6 months to deplete the 2,000 listings as on the current run rate. And so, and that's basically stayed stable. We've been at uh roughly between high fours and into five for the last 18 months. Uh, it continues to climb, but it's climbing very slowly, right? It's climbing slowly.

SPEAKER_03 47:59

Yeah, real estate moves at the speed of a glacier.

SPEAKER_02 48:01

Yeah, exactly. And so we were at 5.38 in May of 2025. Um, the it the really this is another interesting point of this is that the pending sales, so the amount of homes that went under contract are actually up 11%, where our closed volume is down 11%. So that means people are putting offers in on homes and then pulling out and canceling the deal and then not actually ending up buying anything.

SPEAKER_00 48:30

Yeah.

SPEAKER_02 48:30

And so it's it's interesting to see that there's there's demand that wants to buy, but affordability and real the reality of the homes and the quality of the homes, the prices that they're paying, they go under contract and they change their mind for one reason or another, right? There's a myriad of different reasons why they cancel. But it is really fascinating for me to look at pendings are going up where buyers are putting offers on multiple homes, right? They're putting an offer on a home, they cancel, then they put an offer on another home, then they cancel. Then they finally end up buying one, right? So that's three pendings for one closed sale. So that there's demand out there, but getting to that closing finish line is under, demand's down 11% year over year. True demand. True demand. Yeah, true demand. So it's interesting to see demand being down low and active inventory being where it's at, is that gap's widening and that absorption rate is gonna continue to drift, right? Which is gonna ultimately cause prices to continue to stay stable or start to drop. Five months of inventory is basically a balanced market, right? Anything up to about six months of inventory is balanced. You get up over six months of inventory, and now you're gonna see significant downward pressure on pricing.

SPEAKER_03 49:40

Yeah. Well, I think uh it it's it sort of sounds like it's um it's the idea like if you if you if you ask everyone, hey, who who wants a Porsche? Almost everyone's gonna raise their hand, right? Yeah, you know what I mean? There's always gonna be the weird guy that's like, no, I prefer, you know, a Porsche, a Corvette, you know, or I I prefer whatever, right? And like, and that's a guy that like he doesn't want to own a home, he wants to own a lot up on the mountain and live in a tent, right? Right. Congratulations. Most people are gonna raise their hand. Okay, but then the next question is like, okay, so who's you know, who can qualify to buy one, right? And a ton of the hands are gonna go down, right? So like who wants to buy a home? A lot of people want to own a home. Who's qualified and can buy one? A lot of the hands go down. Okay. Then the next question is like, okay, who's ready to actually sound on the line today? You know what I mean? Who's ready to actually transact? Because we have them here ready for delivery. And, you know, a ton of the hands go down because a lot of the people that can are just looking at the environment going, uh, it doesn't seem like I'm in a big need to really do that. And so I'm gonna evaluate my trade-offs more than I maybe would have a couple of years ago when there was, you know, panic buying going on. Yeah. Right. Um, and you know, I I think it's fair. I've I think I've always said people talk about a shortage of housing, right? Based on a number of families. And I say, well, it's like the Porsche conversation, right? Because the only thing that matters is, you know, maybe the number of people that are capable of buying, but really it's the people that are, you know, ready, willing, and able, that are, you know, here to sign, right? They're ready to take delivery of that car. If they're not serious about that in the market, then like it doesn't matter that you measure them as somebody with a driver's license. It's not really actually demand.

SPEAKER_02 51:24

Right, right, exactly.

SPEAKER_03 51:25

So I think it's an interesting stat that you call out because it's you're highlighting that, like, hey, there's there's a lot of activity maybe, but if you look at the wrong data point, it gives you a very false picture, right? Exactly. Gives you a picture that there's a lot of demand for that for housing and man, as soon as rates come down, you know, the the bidding wars are gonna start it, you know, or whatever the the FOMO talking point going out right now is, right? Um, and and the reality is like, no, it's actually like, hey, if you put your home on the market and you're not ready to really sell it, you're gonna get eaten alive by people giving you offers and then getting it under contract and jerking you around and you know, nickel and diamond you over every little repair thing and concessions, and they're gonna beat you up over it because they basically know they can.

SPEAKER_02 52:05

Yeah. It's the exact opposite environment of 2021 where the sellers were making making out with multiple offers and 10,000, 15, 20,000 over asking and no concessions and you know, hard earnest money, all these crazy things. And now it the roles have reversed, and buyers are they see they see the writing on the wall and they see the the market you know environment, and it's a lot, a lot more difficult for sellers to get it done, which is why it's so important that pricing is the key piece. If you are ready, willing and able to sell is being competitive on pricing is going to be the best way you can get the most money out of the environment today because of because of the competition and because of the shrewdness, so to speak, of the buyer, is that you have to you have to present the product that you have in the best light possible. Absolute best best light.

SPEAKER_03 52:59

Yeah.

SPEAKER_02 52:59

Especially with 25% aren't even selling, they're just expiring.

SPEAKER_03 53:03

Well, I think those are the people that they're not ready to they're not they're not actually ready to sell, I think.

SPEAKER_02 53:08

Yeah, or they're getting bad advice. They could be getting bad advice from from their agents or the internet in general, you know. They think they think something is val where there's value and there's actually not value.

SPEAKER_03 53:19

I I yeah, I see that a lot in like the the the price drops, like the eventual price drop. And you know I I think there's a there's a a a disillusion where a lot of people bought in 21, 22, maybe even 23, with this notion that like real estate doesn't go down. You can't lose money in real estate. Like it's housing, housing goes up every year, you know. It's like you'll and and I feel like I'm I'm you know, when I look um or I'm talking to people, the uh the spot where I find there to be the largest disconnect is the people that bought in those years, and they really probably under are underwater on their home, especially net of like transactional costs, and they don't want to believe yet that they're gonna have to sell their home and take a loss, right? Because who loses money in real estate, right? Real estate just goes up. Everyone you know gets rich from real estate, and it's like yeah, no one ever talks about the losses, but they do happen and they're usually quite significant. And uh, you know, it's just like what comes the nature of leveraging your equity, right? It's what happens. Um but but that's a demographic that I see struggle with that, right? And and you generally see it in like just just watch next time, right? When you're like this house seems a little overpriced, but gives, and you go to price history on the MLS, and then it's like, oh, it's like they listed it at the same price I bought it at in 22. And and you know, you've talked to enough people trying to sell homes over time that every single time that happens, it's because they have a what's called an anchoring bias, right? Like they have to get that number for it. Well, how come it's because that's what I paid for it. I'm not gonna take a loss on this, you know. Right, you know, I've never lost money on real estate before. I'm not gonna do it now. It's like you don't get to make that choice. Yeah, exactly. Right? Like that's not how that's not how the market works. So you end up getting just getting stuck with the house.

SPEAKER_02 55:14

I've never lost money on real estate, and I've only bought two houses in my entire life. And it just happened to be in 1990 and 2000, you know, 15 or something.

SPEAKER_03 55:23

Yeah, yeah.

SPEAKER_02 55:24

Like just like the stable markets where they were followed by massive booms and then they sold it right as you know, things started heating up and they made money and then they bought something a little bit lower and then it boomed again, you know?

SPEAKER_03 55:36

Yeah.

SPEAKER_02 55:37

There's a lot of people that are like that, that they didn't they never lost money on real estate because they just happened to hit the market waves at the right times. Because why do people buy and sell a home not as an investment, but as their own primary residence? Because life changes, and a lot of times you just hit the cycle right and you make money. And a lot of people hit the cycle wrong and they lose money every time, you know? Yeah.

SPEAKER_03 55:59

I've I've I have no shortage of people that have said every time I've ever bought real estate, I lose money somehow. Yeah, yeah. You know, it's true. Um, but it's not a it wasn't up to them. But but I've met enough, I've met I've met as many people on the other end of the spectrum and say, I've never done anything but just made money in real estate. This is like the safest thing I could ever do with my money, right?

SPEAKER_02 56:16

Right. And it wasn't anything that they chose or decided on that they just happened to, I'm so such a wizard with real estate that I made this money. It's happened to do with the life changes. Yeah. Yeah. I got married, I bought a house, you know, I got a raise, I bought another house, and I had kids, and then we we retired and sold the house, right? And just happened to be in the in the markets when they were doing well.

SPEAKER_03 56:37

It'd be interesting to do a study on what element of like trend following is a parent in real estate in the real estate market. Um, just like it um well, real estate trades so different than everything else because it's just illiquid. Um and so it moves at a at a super slow pace. So people kind of say, like, you know, you can't you can't time the market. But like um, I guess what I'm saying is like I wonder if there's a natural element of trend following for a lot of people, where like if you say, like, hey, like, you know, I bought a house in the 2000s and then like, you know, yeah, 2007 lost my lost my job, so we moved, right? And like that was a natural occurrence, right? Of like, hey, I you know, I got laid off, and it was because we were going into a massive recession, but wherever they moved, so they sold their house to move to the the new job they found across the country, and there they just said we're gonna rent for a minute while we get used to the area, and then the whole thing falls apart, right? Right. And so you they actually kind of like had a we're naturally forced into a trend file, potentially is kind of my thought, right? And then yeah, yeah. And then, hey, oh man, we've been here and stable. Like, man, look how cheap the prices are and life's stable again. I'll just buy. Well, like now you just bought the bottom, and you're just like, to what extent do you then be like, you know what? I'm gonna do is like, man, we've been here and this is so awesome. We wrote this property values up, and you know, now with this COVID thing, we just don't really love the area anymore. We're gonna move somewhere else. And so they like naturally just sell, you know, that's like a natural time to like sell their house and move somewhere else, right? Like, to what extent do people just kind of you know be like, hey, we again COVID happened, 21, can't take it anymore. We're moving somewhere else, and they just rent somewhere, you know, and now they're just like I'm comfortable renting. I don't know. I would just be interesting if like I could study that somehow. The data would be almost impossible. Yeah, it'd be tough. Um, but I that just what it was like as you were talking through that, I'm like, you know, I wonder to what extent, and then the opposite happened, right? Just like somebody's like, hey, we bought in you know 2005, everything seemed great and stable. And then they're like 2010, I got completely laid off. I was the last guy laid off and couldn't keep it anymore. You know, and so they they get forced out of the bottom, right? And then like they're like, I'm not doing that again. Yep, you know, and then it goes all the way back up, and so it's like the opposite. You kind of get on one side or the other of the trade, and all of a sudden you progress through life, sort of always hitting the trend following in some capacity, or you're always contra trending and you're just getting wrecked over and over.

SPEAKER_00 58:55

Yeah.

SPEAKER_03 58:56

Um I've just I've seen it happen both ways, and I just wish there was a way to put the together the data.

SPEAKER_02 59:03

Um, I think it's it's a balance. It's there's there's gonna be things that are balancing out, right? It's like when one industry is doing well, another industry is doing poorly, and then when you know it flips over. And so, you know, the job markets, you know, you have a a massive job layoff market over in this section over here with these jobs over here in this one community, and that impacts you know, this community over here that's doing really well.

SPEAKER_03 59:27

I think that's I think that's an idiosyncratic point, right? Like, hey, the the economy is generally fine, but over here there's you know, layoffs in healthcare, and over here they're building a brand new, you know, massive Tesla gigafactory, whatever, right? Like okay.

SPEAKER_02 59:42

So on net, like if you were in software, like thinking in 2008, if you were in software, you were at the beginning. You were at the beginning, right? And auto manufacturers, you know, real estate agents, lenders, banking institutions, that market sh and everybody who was in those job categories, yeah, they were probably in the end of this trend at some capacity, yeah, where software engineers and these other industries that were just starting to pick up and get moving, yeah, they're doing really well. And then they they go in and scoop up all that real estate that fell down in 2011, right? So, like depending on the industry, you know, it there's gonna be, you know, pluses and minus for each of those. So I I I think that's why a lot of times each individual housing market is so localized. Thinking of like what are the jobs here in Washington County versus what was it in Detroit, right? What was it in what is it in Texas right now? What is it in California right now, right? Like these different industries and these jobs, like what drives the local economies, drive that real estate market as well.

SPEAKER_03 1:00:41

Yeah.

SPEAKER_02 1:00:42

It's kind of fascinating.

SPEAKER_03 1:00:44

Yeah. I uh real estate is always fascinating. I think we're running out of time, and Everett at this point is probably sleeping because they're so sick of hearing me and you talk about real estate.

SPEAKER_02 1:00:56

I'm I'm interested in this. I I think it's interesting that like our market, but like our market specifically, I think this is a really interesting point, and it would be interesting to see other people's areas and different thoughts is like what makes up their economy. It's like 35, almost 40% of our local economy is completely reliant on growth.

SPEAKER_03 1:01:16

Yeah.

SPEAKER_02 1:01:16

Construction, services, you know, hospitality, all that stuff is if we don't grow, 35% of our market shrinks up, right? And so when we when we face headwinds of growth and issues with growth, that's gonna contract the economy, which is gonna result in uh housing market in a different environment, you know, uh as a delayed function of that. But those local uh those local economies are going to be one of the indicators as to whether your real estate's gonna do well or not. I really I I think there's a lot of correlation there.

SPEAKER_03 1:01:46

Well, I think St. George is gonna end up, or Washington County as a whole, is gonna end up being a great case study, you know, post-mortem on the K-shaped economy.

SPEAKER_00 1:01:55

Yeah.

SPEAKER_03 1:01:55

And the, you know, the asset owners, um, and and the and the um more well-off here in the county are doing really well. And uh the people that aren't are not doing well at all, right? It's it's it's a real struggle, right?

SPEAKER_00 1:02:14

Yeah.

SPEAKER_03 1:02:14

Um, and if that growth contracts, those 35%, like the people involved in that 35%, are gonna be feeling the pain. Yeah. Um, quite significantly.

SPEAKER_02 1:02:22

And I it happened in 2008. They all left. They left the county and didn't come back. It's why our service industry was so poor for so long. Well, our service industry still because they all moved away.

SPEAKER_03 1:02:32

Like our service industry still is poor, right? It's like the number one thing I get from people that come to town. Like they're like, you know, like there's nowhere to eat. Well, it's like I don't have a good land. It's like, well, to to start a restaurant here is incredibly tough because you know, no one wants to pay the price, right? And then no one wants to do the work.

SPEAKER_02 1:02:49

And also it's food cost distribution. We're not like a central distribution hub. So like the overhead, the gen just general cost to get different than it is in other cities and other areas, right? So you're right. Labor is expensive because there's not as much there.

SPEAKER_03 1:03:03

Yeah, everything here is expensive.

SPEAKER_02 1:03:04

And but I'm talking about even like landscapers and contractors, like I've said for the larger service contractors, like simple.

SPEAKER_03 1:03:11

The way to be successful owning a business in St. George is to answer your phone, show up, do what you say, say what you do, and work hard. Yeah. Like you literally have to exist. Yeah. You know, it and and you'll you will be some version of success.

SPEAKER_02 1:03:22

And a big reason why we have that issue is that when the market crashed in 2008, all of those people that were doing those jobs had to leave the county because there was no other job, right? When the growth's not there, they went up to North Dakota, they went to the oil fields, they went to California, they went up north, they went back up to Salt Lake, and a lot of them just never came back. A lot of them just never came back.

SPEAKER_03 1:03:41

Well, if if you look at our local economy without the house, like really without housing growth, it's it's housing growth alone is a huge destroy this county.

SPEAKER_02 1:03:52

Like if not, yeah, yeah. Well, when I say growth, I mean specifically new constructions, whether it's roads, developments, earth movers, but it's HVAC contractors, it's plumbers, it's electricians, it's all these jobs that require new stuff coming in, you know, you you think Orange County, they're already built out. So they there's a big portion of that that's like, oh, maybe some redevelopment, but their economy isn't reliant on growth because they're already built out. All the land is already built, right? And so there's a smaller percentage of their economy that is dedicated to just growing, where we're in that phase where if we slow down growth, if there's water issues, or if there's some kind of moratorium on building or something like that, it would significantly impact the economic outlay. And it would hurt, like you said, the lower, the lowest, the lowest tier on the socioeconomic ladder.

SPEAKER_03 1:04:40

So talk about a headwind for real estate, right? Like residential real estate. Um, so uh they have to keep building, right? If they keep building, uh that's more supply to the market, okay. That's a headwind for price appreciation, price appreciation in homes. Okay. If they stop building, it crashes the local economy. That is also a price appreciation, a price a massive headwind for price appreciation appreciation, right? Yeah. Um so yeah, that's like yeah, that's an interesting yeah, uh, quick framework to think about. Yeah.

SPEAKER_02 1:05:16

And it's I think it's important for you know city planners, you know, local, local industry, you know, whether it's networking, how do we get jobs here, how do we diversify the economy? Because it shouldn't be up to the it shouldn't be up to the politicians, right? It's not it's not up to them to like encourage business growth and industry growth. Right. I think it is something that we need to try to how do we figure out as a community, how do we diversify that economy that it's not so reliant on growth that it's it's a do or die type situation. It's either we do it or we don't.

SPEAKER_03 1:05:46

Yeah. I I think we're getting into a local issues thing, which is like but I think I think there's a there was a different podcast for that.

SPEAKER_02 1:05:52

Yeah, there was. There was there used to be. Yeah, yeah, yeah. There was one at one point. But I think I think that's similar to other areas too, right? Because I think there's Uh suburban cities, you know, as the sprawl happens, right? If you go up to Salt Lake or you go outskirts of Texas, right? Home values went down significantly over the last. The Dallas area has gotten I I I like I don't know if it's fair to use the word annihilated, but I mean it's like the value like you know, decrease has massively gone down because supply has gone up, but you're still those new cities and those new towns and those new developments, they're going to face similar situations to where if they don't have the industry to drive those local economies, it it it is another headwind, right? And so I think I think it's an interesting idea to think locally, economic locally, because you hear all the time you turn on CNN and Fox and talk about the macro market or MSNBC or you know the the Wall Street Journal or whatever. They don't really talk about the local market and the local economic situation. And I think it would be helpful for people to pay attention to that a little bit more.

SPEAKER_03 1:06:56

Yeah. Well, I think the macro economy is actually quite fine.

SPEAKER_02 1:07:00

I mean, uh I defer to you on that, so I have no idea. It's depending on what time of day I turn on, what podcast it could feel like doom or gloom or you know, everything's great.

SPEAKER_03 1:07:10

I think there's I think there's some things where you can, you know, kind of you know, if you're if you're at the party, you can kind of look around and go, you know, this is probably gonna turn out bad at some point.

SPEAKER_00 1:07:19

Yeah.

SPEAKER_03 1:07:20

Yeah, yeah, yeah. I think those guys over there are definitely gonna end up getting in a fight kind of thing. Um, but uh it's you know, I think in in the in the more immediate future, it's not like things are rapidly deteriorating, right? Yeah and and it basically any economy has has a level of productivity to it. And so if you're not in a recession, so if you're not, you know, if you're not contracting, you're growing, right? The natural state of the economy is growing. And I think that we're in that natural state. Um again, I think there's you know, the economy isn't the market, the market's not the economy. Um uh, you know, uh the economy isn't necessarily housing, housing isn't necessarily the economy, but there's some significant overlap. Um and and and there's gonna be, yeah, some some some correlation. Timing is gonna probably be be different, right? Um but the the the the underlying health of the economy really seems to to be fine for now, right? Again, I think, you know, I referenced a K-shape economy earlier. I think that's gonna come to a head at some point significantly. Um, you know, what we're spending on AI data center build-outs is gonna come to a head at some point.

SPEAKER_02 1:08:29

Yeah, we talk about economy. It seems like that's where the biggest growth in the economy is from investments in those types of things.

SPEAKER_03 1:08:36

Again, I'm not comfortable. Like, you know, when we talk about, you know, I think essentially at this point, the you know, the market really is gonna lead the economy uh quite significantly in the sense that if if the stock market stays high and asset prices stay high, the spending can continue to happen, right? Yeah. Um and so as long as there is this perceived wealth because account balances are high via high asset prices, people are comfortable spending. Um and uh and and as and if and if you know, let's call them the central planners, continue to plan that the asset prices need to go higher, they'll probably go higher.

SPEAKER_02 1:09:15

Yeah.

SPEAKER_03 1:09:16

Um, but you know, I think SpaceX is an interesting example. I mean, at IPO'd on Friday. Um, you know, um total animal spirits out there. Um, you know, everyone I got more calls about the SpaceX thing, Rob. Um, like, hey, should I buy SpaceX? Right. This this question, hey, are we buying SpaceX? Hey, should I buy a SpaceX? Yeah. You're the one guy. Um, calling with that question. But uh like so many, I mean, like, man, I'm telling you, people that have never invested before reaching out. Um, people literally call in the office that have never talked to us before saying, like, I need your help getting SpaceX, you know, like, and it's like, okay, why do you think that? And they're like, because I'm I can never get ahead in life. Yeah, like and this is my this is my chance. I have some money and I I need to put it in SpaceX, right? Like, and like that's not what you want, like, that's not healthy, right? But that doesn't mean it's yen. So I I I think like there's some underlying things that look, uh, a a large recession um and a significant, you know, pullback of asset prices is inevitable, okay. Um, but not particularly imminent. Yeah, unless you're Ray Dalio. He thinks otherwise. Well, Ray Dalio. You don't have to go into the Ray thing, but well, Ray Dalio is a macro investor, and what you find in macro is you're often early, and and it and and it takes so long for the macro to really come to fruition in price. Yeah, right. In fact, that's what stamp makes Stanley Drunken Miller was so good at at macro. So he's a macro guy, and he's probably considered the greatest of all time ever. Um you know, he's averaged, I think, like roughly 30% a year his whole career and never had a down year, right? Um and he started with the, you know, his his his kind of deal was like, you know, you start with the macro, okay, because you're gonna get half your trade right, just if you get the macro right. And then you just use technical analysis of the timeless trades, but there's a lot you gotta like keep an eye on because you don't want to be too early. So you gotta wait for the so you gotta know where the ship's heading, yeah. And you gotta, you know, get on the ship kind of at the right time. Um otherwise you end up just like way too early to ideas. And uh and so look, I I I have friends that worked at Bridgewater and worked with Ray. I think they're super intelligent people, far smarter than I am. But I guess what I'm saying is like race I think what he's wrong on is China, candidly. Um, I think almost everything else that he says is is really interesting to me. Um but just because something is perceived as being uh inevitable, like doesn't necessarily mean it's imminent, right? And but to somebody that's been investing for decades and decades and decades, what seems imminent to him may seem like an investing lifetime away for a lot of people, right? Yeah. I mean, we're we live in a world of 30-second podcast reels, sell my home in three days, I can find a new home on Zillow immediately, right? You know, instant offers, blah, blah, blah, all this stuff. So if you say something's gonna happen in the next 18 months, by the time it gets to seven months 17, everyone forgets what you said. Yeah, right. Um and you know, but in the macro world, that's like right around the corner. Yeah, you know. Um, so it's uh yeah, interesting thing with Bridgewater. Yeah, respectable. I mean, impressive I have never uh engaged with or talked to somebody that has spent time at Bridgewater that isn't incredibly smart. Yeah. Yeah.

SPEAKER_02 1:12:58

Yeah, when you're Ray Dalio, you have plenty of plenty of uh success and um evidence to support whether you should listen to them or not. But I think to your point, it's the when, what's the horizon like? And things seem to always be not as bad as you think they're going to be, and not as good as you think they're going to be. You're thinking they're gonna be better, they're you think it's gonna be better than it actually is, and you think it's gonna be worse than it actually is. And so where are we at in that that middle and where does that adjustment happen? But you know, to your everyday, you know, investor person listening to this podcast, it's take one step at a time. And especially if you're gonna get into real estate, it should be long game, should be thoughtful about what you're gonna do. And all the stuff you find about getting you know rich in real estate and investing your way into financial freedom through real estate, all that stuff's old. It's it's too old. None none of the the environment of those videos. If you look at the videos of like, hey, this is how you get rich in real estate, they're probably all three years old or older because that is not the economic environment. That is not the housing market.

SPEAKER_03 1:14:11

I think the way you get rich in real estate right now is it is probably your rent a place and invest money somewhere else. Kennedy, that's my Yeah.

SPEAKER_02 1:14:18

No, I I think I don't think you're wrong for a lot of people. I don't think you're I don't think you're wrong. I think it goes back to what is it, what is it the lifestyle that you're actually wanting? Are you buying real estate as an investment or are you buying real estate to live in a community and have a quality of life that's the what you envision your life to be?

SPEAKER_03 1:14:32

Yeah, there's there there is a let me add one last thing as we wrap it up here. There's a guy, and I'm trying to remember his name off the top of my head. Uh I just his ex-handle is strip mall guy.

SPEAKER_02 1:14:44

Oh, yeah, yeah, yeah.

SPEAKER_03 1:14:47

Yeah. Um he's he's uh you know commercial, well, I mean, specializes in strip mall properties. Um at one point he was. I mean, I don't know. I think that's all he does. Yeah, all he does is strip malls. He definitely is niche. Um I'm just trying to remember what his name is. He lives in New York City and he does stuff primarily really across the country. Yeah. Um uh you know, buys and operates. He's not like a uh salesman, he's not a broker, right? But he he says something like along the lines of like, look, everyone else buys real estate because they think it's gonna go up.

SPEAKER_02 1:15:15

Don Tetman.

SPEAKER_03 1:15:16

Yeah, Don Tetman. So Don says, I buy everyone else buys real estate because they think it's gonna go up. He says, I buy real estate that I know I can make go up, right? So it's a market, in my opinion, that look for those opportunities where you have edge, right? So if you're a developer and you know you what you can get passing zoning changes and build it out and make you you know you can make the values go up, right? If you're somebody that's an experienced real estate investor and you know you can buy a property and do a certain kind of rehab and raise rents and it fits your rental pool the right way and these sort of things, like man, that's awesome, right? Like you have edge. If you're like, hey, I got a $50,000 bonus or a small inheritance, and I think I should just go buy one single family rental and I'm gonna own a rental, right? Or hey, I'm gonna, you know, I do feel comfortable getting a little bit bigger house now, and so I'm gonna move up. Like, should I keep, you know, everyone tells me to keep my home and keep it as a rental and you know, get the next one. Um, like maybe not, right? Yeah. Um, so you just like figure out where you've got edge, you know, extract your edge. But I think like from the what we'd call the beta side of of real estate, which is just like, hey, you can just own any real estate in the real estate market, it's kind of just kind of gonna give you the return. I think it's a very underwhelming environment to be too excited about. Yeah.

SPEAKER_02 1:16:37

It's a good way to wrap it up. So thanks for having me on, man. Dude, thanks for coming back. It's good to see you again. Find me on real estate435.com. Still doing it here in Washington County. Yeah. Uh I haven't been doing the podcast. Haven't been doing the podcast. Uh yeah, man. It's uh heavy lift to do a good job.

SPEAKER_03 1:16:57

It is a heavy lift to do a podcast.

SPEAKER_02 1:16:59

Yeah. And to do to do a good job, right? I don't I don't want to I yeah. The last thing I want to do is just hear myself talking just to say I have a podcast. So I if I'm gonna do a good job, I gotta make sure I have the yeah, resources, time, energy, interest, passion for it. And yeah, we did it for three years every single week, and it's a lot, dude. So I know. You're still you're on the you're on the train still. Still going strong for now. That's right. All right, man. Uh where they find you? Real estate435.com. Yep. Uh Rob the Realtor 435 Instagram.

SPEAKER_03 1:17:35

All righty. Uh any other questions, comments, jokes, concerns, hate mail, uh, hit us in the comments. Let us know. Uh, always love hearing from everyone.

SPEAKER_02 1:17:46

Send it to Jeff at real estate435.com. Just the hate mail. Just the hate mail is Jeff at real estate435.com.

SPEAKER_03 1:17:52

All right, we'll see you guys all out there.

SPEAKER_02 1:17:53

See you guys.