J Scott: We’re Due for a Recession, But It Isn’t All Bad for Real Estate

Dave:
Hey everyone, Dave Meyer here from BiggerPockets right now at the start of a new year, it is the perfect time to take somewhat of a reset and make a plan on how to maximize your financial position over the next 12 months. And on this channel, we firmly believe that investing in real estate is the single best way to do that, but we also at the same time understand that a lot of you may not have ever invested before, or maybe you have, but you sat out 2024 because it was a really confusing and uncertain year. So today we’re going to catch you up by asking a few of the biggest questions about the year ahead. We’re going to cover mortgage rates and whether there’s any hope of rate relief in the coming year, we’ll talk about whether the entire world is basically missing recession red flags in the us, and we’ll talk about some potential Trump policies like deportations and tariffs that could have an impact on the housing market.
We’ll also cover a bunch of other topics, but the general idea here is that although we don’t know the answers to these questions, if you can track these trends and where they’re heading, you’re going to be in a better position to understand the market and jump in on great deals in 2025. And joining me to talk through these big questions is a familiar face from the BP family, J Scott. J has been involved in more than $60 million worth of real estate transactions during his career. He’s hosted a podcast for BiggerPockets and he’s written five books including one with me. Let’s bring on J. J, welcome back to the BiggerPockets Podcast. Thank you for joining us.

J:
Thrilled to be here. It’s been a while.

Dave:
Do you know how many times you’ve been on,

J:
I mean, between guest and guest hosting and all the different podcasts and the ones we hosted a couple of years ago? It’s got to be dozens, hundreds, who knows?

Dave:
So hopefully everyone in our audience knows you already. Jay, you’ve been around the BiggerPockets community forever, written a lot of books, hosted a lot of podcasts, but for anyone who doesn’t know you, can you just give a brief intro?

J:
Yeah, I am a former engineer and business guy, left the tech world in 2008. My wife and I started flipping houses in 2008. I found BiggerPockets in 2008, and that’s how I learned how to flip houses. We flipped just under 500 houses between 2008 and 2017 ish. Then I transitioned into multifamily and I’ve been investing in multifamily for the last six or seven or eight years now. We own about 1100 units around the country, multifamily another hundred of single family, and we buy in a lot of places and a lot of different asset classes and have fun with it.

Dave:
Jay, you and I are both sort of analytics people, like looking at the macro economic environment, and I’m sure this time of year like me, you get a ton of questions. People want you to make predictions about what’s going on, but making predictions is super hard and instead I really like to just think about the big themes, the big questions that I want to answer and think about into 2025. And so that’s what I’m hoping to talk to you about today. Let’s talk about some of the big questions as we head into 2025. The first one, of course has to be mortgage rates, and you can’t avoid this question. Can you tell us a little bit about where you think we’re heading with mortgage rates?

J:
Yeah, and let me start with, you’re right, I don’t want this to be a predictions episode. None of us have a crystal ball and things are kind of crazy these days. They have been for the last couple years. And so I like to think of things in terms of frameworks and the likelihood of certain things happening if certain conditions are met, so we can talk about what are the potential things that could happen in the economy and politically and et cetera, and how they would impact the market. Perfect. So starting with mortgage rates, the last three times the Federal Reserve has met to drop their key interest rate called the federal funds rate. They did. So we’ve seen a point drop over the last few months from the Federal Reserve, and in theory that should be a good indicator that rates are coming down including mortgage rates.
But the reality is we haven’t seen mortgage rates come down. In fact, after that last cut that we saw in December, we saw mortgage rates spike. When we talk about mortgage rates, what drives mortgage rates or what influences mortgage rates the most, it’s this 10 year bond. So the rates that the 10 year bonds are paying have a big impact on what mortgage rates are. And so at the end of the day, if you put all that together, what you find is the rates for mortgages are often influenced by what investors believe inflation’s going to do over the next 10 years. I know that was convoluted, but that’s really what it boils down to. If investors think inflation’s going up over the next 10 years, mortgage rates are generally going to go up. If they think inflation’s coming down, mortgage rates are generally going to come down.
And unfortunately what we’re seeing today compared to even just a few months ago or a year ago, is that there’s a lot less optimism about inflation coming down. We saw inflation three years ago at like eight, nine, 10% Fed raised interest rates to get that inflation down. We got that inflation down to around 3%, even 2.8%, whatever it is today. And that was a great start. And the question was do we keep going down? Do we get to that 2% inflation rate, which is where the Fed wants us to be or are we going to see it pop back up? And for a long time it seemed like we were going to get back down to that 2% number. Well, now it’s starting to feel like things are popping back up. And so that fear over inflation is driving up the long-term bond rates. The long-term bond rates are driving up mortgage rates, and we’re recording this at the end of December. And what we’re seeing this week is for the first time in, since pretty much the beginning of the year, we’re seeing mortgage rates over 7%. Again, what are we going to see next year? Well, again, it goes back to what do we think is going to happen in terms of investors’ fear over inflation? Do we think that there’s going to be continued fear about inflation? If so, mortgage rates are going to stay elevated.

Dave:
If

J:
We see inflation start to come down for some reason, mortgage rates will likely come down. So that’s really where the discussion should go.

Dave:
Thank you for that explanation. It’s super helpful and hopefully everyone understands this. Again, fed doesn’t control mortgage rates. It’s really about what bond investors are expecting over let’s just generalize to a 10 year period. And it seems that since August-ish, maybe September, investors are more fearful of inflation. And I’m curious, Jay, what do you think the catalyst for that was?

J:
So there’s several catalysts, and number one, you’re absolutely correct. Typically when the Fed lowers interest rates, it’s now cheaper for us to borrow money. There’s less incentive to save money because we’re not getting as much interest on the money we’re saving. And so what do people do when it’s cheap to borrow and we don’t want to save? We go out and spend money. And when we spend money, that basically puts the economy into overdrive and we start to see more inflation. And so the Fed cutting interest rates certainly was an impact on the perception that we could be facing more inflation. Additionally, we got the November numbers over the last few weeks, and what we saw was while inflation didn’t really go up a ton in November, we did see somewhat of a higher jump than we would’ve expected. We certainly saw numbers that were a little bit higher than we wanted to see, and it was an indication that even if inflation isn’t necessarily going up, it’s no longer going down.
And then the other piece that is probably going to be a decent part of this conversation in many areas, and I don’t like to get into politics, but you have to think about politics when you think about the economy because political decisions and political legislation are often going to drive economic outputs. With the new administration coming in, we have a number of potential policy drivers that could be inflationary. So number one, Trump has talked about tariffs. Tariffs are inflationary. Tariffs are attacks that are paid by US companies when they import goods, and for the most part, those taxes are passed on to consumers in terms of higher prices. Now we can have the discussion about whether long-term would that be good for the economy, would that be good for prices, would that be good for manufacturers in the us? And that’s a completely separate discussion.
I’m not saying tariffs necessarily are bad. In fact, in some situations they’re actually really good, but the reality is tariffs are inflationary and broad tariffs across all categories. All countries that are exporting to us is highly inflationary. And so the big question is, I know Trump has been talking about tariffs, is it just talk? Is it a negotiating stance or is he actually planning to do it? Well, as of today, we don’t know. And so the fear is he’s really going to put in place a lot of tariffs, and that’s inflationary. And so that’s driving some of the concerns around inflation. Second, Trump has talked about deportations. When you deport people, sometimes those people that you’re deporting are people that are contributing to the economy. And there are certain areas of the economy where we see immigrants, even illegal immigrants, highly impacting the workforce. Number one is agriculture.
So we see immigrants, and again, illegal immigrants doing a lot of the work in the fields, picking our fruit, picking our vegetables, basically driving the agriculture industry, hospitality industry. So if you’ve ever gone to a restaurant, there’s probably an immigrant in the kitchen, washing dishes. Again, maybe any illegal immigrant hotels, people cleaning rooms. I mean, I know it sounds stereotypical, but the data actually meets the stereotype in this case. And so for a lot of these industries, if we have mass deportations, well these industries are going to see reduced labor force. When you see a reduced labor force, what do you have to do to hire people? You have to pay more money, you have to increase wages. When you increase wages, you increase the money supply. When you increase the money supply, we see inflation and so deportation, if it impacts low wage workers, if we see a lot of low wage workers leaving the country, that’s going to be inflationary. So that’s number two. The third big potential policy issue that could be inflationary that Trump has talked about is he wants to have more control over the Fed. He wants to have more say in federal reserve rate decisions. And as we talked about earlier, when you lower interest rates, that drives inflation, also drives the economy. It makes the economy look really good,
But it creates inflation. And Trump has made it very clear, not just now, but in his first term, that if he were in charge of interest rates, he would want them lower. And so if he takes any control over the Fed, if he has any outsized influence over the Fed and he convinces them to lower rates in a situation where we maybe shouldn’t be lowering rates, that could drive inflation as well. And so again, I don’t know if he’s really planning to do these things or if they’re just negotiating stances and he’s not really going to, but there are enough people that are concerned that he’s actually going to do these things, that there’s a fear of inflation right now, and that’s one of the big things that’s driving both the 10 year bonds and mortgage rates to go up.

Dave:
Perfectly said Jay, and I think it sort of just underscores the idea that we talked about at the beginning. And the premise of this show is that we don’t know which of these things are going to happen. These are just questions. They’re open questions that we all need to be thinking about. And right now, to me at least seems like a particularly uncertain time because we know Trump was elected, he’s going to be inaugurated January 20th, but we don’t know exactly what the policies are going to look like, and that uncertainty, I think in itself can drive up bond yields, right? People just don’t know what to do, so they want to reduce risk and they basically demand a higher interest rate to buy bonds than they would if they had a clear path forward. And as Jay said, this happens with every president, right? They campaign on one thing, what the actual policies look like when they have to go through Congress in most cases, or there’s going to be a period of negotiation.
And until we know exactly how some of these policies get implemented and if they get implemented at all, there’s going to be this level of uncertainty. So that’s why I totally agree with you that this is maybe the biggest question in terms of mortgage rates and the housing market is which of these policies do get implemented and what are the details of these policies? That’s definitely something I recommend everyone keep a very close eye on as we go into 2025. Okay, Jay, I want to ask you about what you think will happen to affordability in the housing market, but first I have to tell everyone about Momentum 2025. This is BiggerPockets Virtual Investing Summit. It’s going to be super cool. It starts February 11th, and you can join us for an eight week virtual series. It runs every Tuesday from two to three 30 eastern, where we’re going to dive into all things real estate investing to set you up for success here in 2025, I’ll of course be there, but there’s going to be tons of different investors.
We’re going to have Henry Washington, Ashley Care, James Dard, we’re all there to share insights on what is happening in the market and how to make the most of it in this year. And this is a really cool summit because it’s not just about listening to investors. You actually get to meet other investors in small mastermind groups to have a chance to share ideas, get feedback on your own plans, and have a little bit of external accountability. On top of that, of course, you’re going to get access to seasoned pros who have built impressive portfolios, and you’ll get bonuses on top of all this. By joining, you’ll get more than $1,200 worth of goodies, including books, planners, discounts for future events. It’s really an incredible package. So sign up today. You can register now for Momentum 2025 at biggerpockets.com/summit 25. That is biggerpockets.com/summit 25. And make sure to sign up soon because if you do it before January 11th, you get our early bird pricing, which will give you a 30% discount. So if you’re going to sign up, make sure to do it quickly and get those savings. All right, we’ll be right back.
Thanks for sticking with us. Let’s jump back into this conversation with Jay Scott. Alright, so Jay, let’s move on to a second question I have. It’s less about macro economy, less about mortgage rates, more about the actual housing market. We have seen this huge pendulum swing over the last couple of years in housing affordability during covid, some of the best affordability we’ve seen in decades now, we’re still close to 40 year lows in affordability, and this has paused a huge slowdown in transaction volume. I think just anecdotally, it seems like it’s preventing a lot of people, investors from entering the market, getting into real estate investing. Do you think there’s a chance affordability improves in the coming year?

J:
Again, I think it goes back to the question of, well, what’s going to happen in the economy if the economy keeps going on the path that it’s been on for the last couple years, which is a reasonable amount of inflation, strong jobs performance to a large degree high GDP wages doing decently well, don’t get me wrong, there’s a big wealth gap in this country where a lot of people are suffering, but we also see a lot of people that have been doing very well for the last few years. If that continues, I think what we’re going to see is a continuation of the exact same thing that we’ve seen in the housing market over the last couple of years, which is very low transaction volume, very few people who want to sell into the market. So for the most part, we’ve got, I think last I looked, 72% of mortgages were under 4%.
Something like 91% of mortgages were under 5%. People don’t want to sell and get rid of their three, four, 5% mortgage if they’re just going to have to buy an overpriced house and get a seven or 8% mortgage. So there’s not a lot of appetite for sellers to sell. And then on the buyer side, there’s not a lot of demand out there when interest rates are at seven, seven and a half, 8% because buyers know that if they’re buying it as a rental property, they’re not going to cash flow. If they’re buying it as a personal residence, they’re going to be paying probably more than they’d be paying if they were just renting. And so we’re not going to see a lot of transaction volume if the economy stays on the path that it’s been on. That said, if we see the economy change in one of any number of ways, if we see mortgage rates start to go down, that’s going to encourage sellers to sell and buyers to buy.
And I think we’ll start to see some transaction volume and I think any transaction volume at this point is going to be deflationary in the market. I think it’s going to push prices down a little bit. I’m not saying we’re going to have a crash or anything, but we don’t have a lot of what’s called price discovery right now. We don’t know what things are really worth, and I suspect that if we had more transaction volume, what we would find is that real prices are probably a little bit lower than where they are today. So number one, we could see mortgage rates come down. I think that would impact prices a little bit. The other big thing is we may very well be due for a recession. It’s been about 16 years since we’ve had a recession that was driven by anything other than covid.
Debt levels have increased significantly, both government debt levels, personal debt levels, corporate debt levels, and at some point it’s unsustainable and at some point we’re going to see a recession. And when you have a recession, people lose their jobs, people’s wages go down and that’s going to impact their ability to pay their mortgages. We saw this in 2008 when people can’t pay their mortgages, they either have to sell their house or they get foreclosed on, and that’s going to impact housing values. And so I think there’s a really reasonable chance that we’re going to see some level of recession over the next 12 months, and I think that could have an impact on housing prices downwards as well. Another thing, and we didn’t talk about this earlier with the Trump policy initiatives, but one of the other big initiatives that he’s been talking about is austerity. Basically cutting the federal budget right now, the government spends a ridiculous amount of money, $6 trillion, which is about 2 trillion more per year than they actually bring in tax revenue. And according to Trump and Elon Musk and Vivek, they want to cut $2 trillion from the federal budget. That might be great long-term from a US debt perspective, but short term that is going to crush the economy basically.

Dave:
Yeah, it comes with consequences.

J:
Millions of people are going to get laid off, millions of people aren’t going to be getting payments from the government that they otherwise would be getting. It’s going to slow the economy down and we could see a recession. And so that’s another policy initiative that could drive a lot of what we’re going to see in 2025. So I would turn this question back to the listeners. Do you think that Trump and Ilan and Vivek are going to be successful at significantly cutting the budget? Again, if so, might be great, but it’s going to have a lot of short-term negative consequences, or do you think that this is one of those policy initiatives that they really want to do but they’re not going to be able to do it? In which case we could see status quo for the next year, prices staying high, affordability, staying low, transaction volume, staying low, all in all, my belief, and I’ve been saying this for a couple years now, is I think we’ve got another several years of prices kind of staying flat while inflation catches up, and that would be my best guess.

Dave:
Well, here we go, making predictions, but I tend to agree, I think the affordability problem doesn’t have an easy solution and I don’t see it being one thing. I don’t think prices are going to crash and it’s going to improve. I don’t see mortgage rates dropping to 4%. It’s going to improve. It’s probably going to be a combination of wage growth, slowly declining, mortgage rates, flattening appreciation that gets us there eventually. So I tend to agree with that. And the other thing I wanted to mention, because we are again talking about questions for 2025, you mentioned something about paying your mortgages that number mortgage delinquency rates to me is sort of like the key thing to keep an eye on. If you think prices are going to go down or would probably at least to me be the lead indicator for prices starting to go down.
Because in the housing market, basically the only way prices going down is when people are somewhat forced to sell. No one wants to sell their house for less than they made. It’s not like the stock market where people are regularly doing that. This is their primary residence. For most Americans, it’s their primary store of capital, and so they’re only going to do that if they’re forced to. Right now, mortgage delinquencies are basically at 40 or lows, they’re extremely low. As Jay said, that could change, but to me, unless that changes, I don’t think we’re going to see prices in any significant way start to decline. They definitely could come down a couple percentage points, but for me, that’s one of the big questions. One of the things that to keep an eye on again heading into next year is does that mortgage delinquency rate start to rise at any point in 2025?

J:
And this again is going to be a theme of this entire discussion that things can change and a lot of things are going to be dependent on what happens in the economy and what happens politically and what happens in the industry. I really would encourage anybody out there that’s listening, get good at following the economic data, get good at understanding what parts of the economy impact other parts of the economy and how decisions by Congress and decisions by the president, decisions, by the Federal Reserve decisions, by big companies, how they impact the economy and how everything kind of plays in and works together because a lot of this is going to be an evolving situation over the next couple years just like it has been the last couple years. I don’t mean to make it sound like anything has changed just because we have a new administration coming in. This is the way it’s been since covid. We have an evolving situation every day and we just need to make the best decisions we can at the time.

Dave:
Yeah. Do you long for the days when the housing market used to be a bit more predictable?

J:
Well, it’s funny because back in 2017 I wrote a book called Recession Proof Real Estate Investing and BiggerPockets book, go check it out,

Dave:
Great book.

J:
Basically the book was all about economic cycles and how for the last 150 years in this country, we see these ups and downs in the economy and things get good. We see periods of prosperity, economies doing well, jobs are doing well, wages are going up, inflation is increasing, and then we get to the point where we have too much inflation and too much debt. Prosperity goes away and we enter into a recession and people suffer and there’s a big wealth gap and wages go down and things are bad. And then we get back into the good part of the cycle and the bad part of the cycle, and that cycle continues. What we’ve seen for the most part over the last four or five, six years basically since Covid, I guess four or five years, is that we don’t have cycles anymore. And what we see is all of these economic conditions, both the good and the bad kind of conflated together all at the same time.
And you can see that now you can see that in many ways the economy from a metric standpoint is better than ever. GDP is over 3%, unemployment’s under 4%. Wage growth is pretty strong. We’ve seen inflation, which means the economy’s going well, but at the same time, we’ve got a lot of people who can’t pay their bills. We are seeing inflation that wages just haven’t caught up. So all the price increases from the last couple of years are still weighing on people. We’re starting to see unemployment bump up, and so we have kind of these good and the bad all kind of merging together into one economy. We no longer have these good and bad cycles. And so I think that’s part of the confusion that a lot of people are seeing is that we don’t know what to expect next. It used to be if we were going through a good period, we know at some point in the next couple of years we’re going to have a bad period, and then within a year or two after that, we’ll have a good period again. At this point, I think nobody knows are things good, are they bad, and where are they headed? And until we get back into cyclical economy, I think it’s going to be very hard to predict the future moving forward.

Dave:
Huh, that’s a really interesting thought. So correct me if I’m wrong, but basically you’re saying back in the time the business cycle, the economy works in cycles makes total sense. Jay’s book is great at outlining this, and during that time it was sort of like when things were good, it was sort of good for everyone, and then there was a period when things were sort of bad for everyone and that’s not happening now. Instead we have an economy that’s good for people just sort of continuously and an economy that’s not so good for people sort of continuously, and those things are happening simultaneously. Is that right?

J:
Yeah, and I think a lot of it goes, and again, we can trace it back to starting after the great recession. The government has released a lot of stimulus. There’s been a lot of debt built up in this country, trillions upon trillions, tens of trillions of dollars since 2008, nearly $15 trillion just in the last six years. And so when you pump that much money into the economy, basically what you’re doing is it’s the equivalent of taking a dying person and putting them on life support. I mean, medicine’s pretty good. We can keep somebody alive for a really long time, even if they’re not healthy. And that’s essentially what the stimulus that the government has created, has done in the economy. It’s kept it alive and kept it moving forward. Even though at the very heart of it, our economy right now is not healthy.

Dave:
It’s interesting because I obviously never want to root for a recession. I don’t want people to lose their jobs or for these negative things to happen, but the way you’re describing it almost sounds like it’s necessary for some sort of reset to happen.

J:
Yeah, well, that’s what recessions are. And so again, if you correlate debt, and again, I’m talking government debt, business debt, personal debt, credit card debt, if you correlate debt to the cycle that we just talked about, what you’ll see is during those periods of prosperity, debt is building up and then we get to this inflection point, this top point where we start to go into a recession and that’s when too much debt has been built up and now all that debt starts to go away. It goes away because people get foreclosed on and they lose their mortgage debt or they go into bankruptcy and lose their business debt or they lose their credit card debt when they go into bankruptcy or their car gets repossessed and they lose their car debt. Basically all this debt starts just evaporating and going away, and that’s what a recession is.
And then we get back down to the bottom where we have very little debt in the system, and then the whole cycle starts again. And so what we’re seeing now is debt has been building up and building up and building up since 2008. Again, business debt, personal debt, government debt, and at some point it needs to go away. And unfortunately when that happens, the only way that debt goes away is for businesses to go out of business and people to default and lose their houses and lose their cars and all of these bad things. But right now we have so much debt built up that when that happens, it’s probably not going to be a minor event because there’s a lot of debt that needs to evaporate for us to get that reset that you were talking about.

Dave:
I do want to dig in deeper on this question of whether there’s a recession on the horizon and what could trigger it, but first a heads up that this week’s bigger news is brought to you by the Fundrise Flagship fund, invest in private market real estate with the Fundrise flagship fund. Check out fundrise.com/pockets to learn more. Alright, we’ll be right back. We’re back. Here’s the rest of my conversation with Jay Scott, you look at the economy, things are going well. We’ve talked a lot about potentially stimulative policies with the new administration, so is there anything on the immediate horizon you think could lead to a recession?

J:
Yeah, I think a lot of it is just going to be based on global economic environment over the next couple of years, and I’m going to be honest, I’m not a fan of a lot of the policy initiatives the new administration is proposing, but at the same time, I think they’re in a really tough situation regardless of the domestic initiatives that we put in place, simply because there’s a lot of global stuff going on, and so we know about the obvious stuff. We know that we have got the war in the Middle East, we’ve got the war in Ukraine with Russia, and that’s causing some instability and there’s oil wars still going on behind the scenes. At the same time, we’re starting to see Europe running into a lot of economic issues. They’re starting to see runaway inflation again. They’re starting to see their debt build up. They’re starting to see governmental issues. There’s been no confidence votes in a couple
European countries recently. And so those things impact the us. Look at China. I skipped China, but that’s probably the biggest one that we should be talking about. The Chinese economy is slowing down considerably. Their GDP is expected to be about 5% this year, which if we were the US, GDP 5% is fantastic, but China’s used to having eight, nine, 10% economic growth every year, and so 5% basically means they’re going into a recession. And so why do all these things impact us? Because we live in a global economy right now. We have lots of businesses in this country that rely on other countries buying our goods, and we have a lot of consumers in this country that rely on buying other country’s goods. And so when other countries start to suffer, when we start to see an economic decline around the world, ultimately that is going to impact the US and it may not be something that any administration could control or fix. It may be that if the world slides into a global recession, the US is just going to get pulled along with it and we may be facing circumstances that are essentially outside of our control. At the same time, I am a little concerned that if the incoming administration does everything they promised, they could exacerbate that situation. And if we create trade wars with tariffs that could push the rest of the world along into this recessionary period even faster than I believe is going to naturally happen anyway,

Dave:
I do think that’s sort of one of the questions going into next year is what happens with geopolitical stability or instability for that matter, and how is the US going to be impacted and how long can the US outshine other economies? What’s going on? The rest of the world is already underperforming economically, but the US continues to sort of defy that trend, but can that happen forever?

J:
The other thing that I’ll mention, and this is probably more relatable for a lot of people, is that with the federal reserves saying rates are likely to be higher for longer, those rates, those treasury bond rates specifically impact how much the US is paying for all this debt that we have. Yeah, right now we’ve got $37 trillion worth of debt, and we’re paying on average about 3.2% I think it is per year. So you can multiply 37 trillion by 3.2%, and that’s how much we’re paying on our debt. Two things are likely to happen that 37 trillion is likely to go higher, so we’re going to have more debt over the coming years than less. And two, that 3.2% interest that we’re paying, as long as interest rates stay above 3.2% for our US bonds, that interest rate that the US has to pay on their debt’s going to go higher. So when you multiply a higher number by a higher percentage, the cost of just keeping this debt is going to keep going up and up and up. And so I think that’s going to drive a lot of issues. Maybe not in the next year, but certainly in the next several years in a negative way.

Dave:
Well said. And yeah, again, just another reason why pointing back to policy and whether they are going to do these austerity measures and try and bring in the debt, if there’s going to be more stimulative policies, really big questions that we need to answer next year. The last question I’ll ask for you, Jay, is given everything, all of this uncertainty in the market, do you still think it’s a good idea to invest in real estate?

J:
I always think it’s a good idea to invest in real estate. So unless you believe that the US economy is going to absolutely collapse and we’re going to lose our world reserve currency status, we’re going to lose our strongest country in the world politically and militarily status. As long as you think that the US is going to stay the number one country in the world from an economic and a military and political standpoint, our assets will eventually keep going up. That trend line is going to keep going up, and so owning assets is going to be a good thing. And real estate, I mean, it’s cliche, but they’re not making more of it, and real estate will continue to go up. Do I know that it’s going to go up in the next year or even five years? I don’t. But there’s been no 10 year period in this country in the last a hundred and thirty, forty, fifty years where we haven’t seen real estate go up.
And so as long as you’re investing conservatively, as long as you’re sure that you’re not going to run into cashflow issues that are going to force you to give back a property because you’ve overpaid for it or your mortgage is too high, if you can hold onto a property long enough in five or 10 years, you’re going to be very glad you bought that property. I’ve been investing in real estate for nearly 20 years, and there was no time in the last 20 years where I bought a property that I wasn’t ultimately happy that I

Dave:
Did. I agree with all of that, and also just when I look at other asset classes right now, they’re just not as appealing. The stock market to me is very expensive right now. I invest a little bit in crypto, but just for fun, and I just think real estate offers a little bit more stability right now during a very uncertain time. And like you said, the risk of inflation is high, so doing nothing comes with risk right now. And so at least to me, obviously I’m biased. I work at BiggerPockets. I’ve been investor for 15 years, but the fundamentals to me haven’t changed even though there is sort of this short-term uncertainty.

J:
And here’s the other thing. You mentioned inflation, and again, we don’t know exactly where inflation’s going, but there’s a lot of concern that it’s going to stay above the fed target for a while. I’ve heard people concerned that it’s going to spike again. Real estate has historically been the single best inflation hedge on the planet in terms of assets. Again, if you look at the trend lines for inflation and real estate values, for the most part, they’ve gone hand in hand for the last 120 years. Right now, real estate is much higher than inflation over the last couple of years, but at no point in the last 120 years has real estate grown at a lower rate over any multiple years than inflation. And so if you’re concerned about inflation, even if all you want to do is make sure that the money that you have isn’t getting eaten away by inflation, real estate is probably the safest investment on the planet.

Dave:
All right. Well, thanks so much, Jay. As always, it’s great to hear from you and learn from your insights. And everyone, if you want to learn more from Jay, he’s got a bunch of books for BiggerPockets, written a lot for the blog, just a wealth of information. We’ll put links to all of his books and everything else you can get from him in the show notes below. Thanks again, Jay.

J:
Thanks Dave,

Dave:
And thank you all so much for listening. We’ll see you next time for another episode of the BiggerPockets podcast.