Could Tariffs Derail the Plan?

Dave:
The real estate market is constantly shifting and you as an investor need to be informed. I’m Dave Meyer. Joined today by our expert panel of Kathy Fettke, James Dainard and Henry Washington. Today we’ll break down the latest developments around why trade policies mean the Fed doesn’t seem likely to lower rates in the next couple months, and President Trump’s displeasure. With that stance from Jerome Powell, we’ll debate what would happen to the real estate market. If Trump gets his way and we get a 1% federal funds rate, then we’ll turn our attention to how recent developments in the New York mayoral race could affect Florida’s real estate market and how all cash buyers are also rocking the boat in New York and across the country. This is on the market. Let’s get started. Henry, James. Kathy, welcome. It’s great to have you here. And Kathy, I think congratulations is in order, right? Oh yeah. With your daughter getting engaged.

Kathy:
Yes. We were in the Dolomites for a family vacation, the Italian Alps, and yes, Krista was proposed to and is now engaged. It was awesome.

Dave:
Congratulations. The pictures looked amazing, and having met Krista and her fiance, Alec, both wonderful people, very excited for them. James, how are you doing?

James:
I’m doing good. It’s been a scramble day. I just bought the biggest house I’ve ever purchased for a flip and my contractor blew up the same day, so now I am in scramble. My whole plan that I’ve been working on for 90 days is now in the toilet and it’s time to restart on the most expensive home I’ve ever been in. So I’m doing terrific, Dave.

Dave:
Well, you’re awfully chipper about this whole situation.

James:
I thrive in chaos and anxiety, so

Dave:
Yes you do. I will get it done.

Kathy:
Yes you will.

Dave:
All right, good for you. I am sure you will get it done. I appreciate that attitude. Henry, I know you’re in Vegas. I can see the background right now. How’s Vegas coming for you?

Henry:
Vegas is going terrible for me in terms of gambling, but in terms of time with my family, it’s been incredible and I’m enjoying that. But also, I don’t know, real estate’s just not hitting today. My acquisitions manager’s leaving my sales guy and my other business is leaving. I just got an inspection report back on a house. We’re selling that. It’s a flip. Their list of requested repairs for the inspection is the inspection report. They want every single thing found in the inspection fixed. Let’s see, what else do I got?

Dave:
That’s bad.

Henry:
It’s been a morning.

Dave:
Yeah, something’s in the water. Mine’s small potatoes, but I might be in my first real estate lawsuit too. Let’s just start these couple days. I’ll be suing them, not the other way around. Way better. Yes, it’s a better situation to be in, but man, something bad in the water this week. But hopefully we’re all going to get through this thing and today we are going to help you get through the very tumultuous market economic conditions that we’re in right now. We have four great stories for you, so let’s jump in. All right, I’m going first today. I always let everyone else go first. I always go last. I’m first today because I think this story is important and everyone cares about interest rates and mortgage rates. So my headline reads, Powell confirms this is Jerome Powell, the chairman of the Fed, confirms that the Federal Reserve would have cut rates by now were it not for tariffs. Basically what they were saying is that the way the labor market is moving, the way that inflation is moving, if they didn’t have fear that inflation was going to pick up because of tariffs in the next couple of months, they already would have cut rates right now, which to me signals that they’re already seeing some weakness in the labor market and brings into question, what is the Fed going to do over the next couple of months? Henry James, I’d love to hear your reaction, Henry, you’re laughing. What do you think?

Henry:
Is that the reason or is that Jerome Powell’s way of saying, Hey, you want entrance rates down? If you hadn’t have done this tariff thing, they would’ve been,

Dave:
Do you think he’s tried to get the tariffs to get moved down? There’s a stalemate going on.

Henry:
No, I think it’s a legit concern. No one knows what the impacts of these tariffs are going to be yet, so that’s their job. Their job is to try to predict what may or may not happen and then pull the one or two levers to have access to either counteract that or help the situation. So politics aren’t my strong suit and neither are strong economics, but it makes sense to me.

Dave:
What do you think, James?

James:
I actually think if people are probably going to get mad about this, I think Jerome Powell’s actually done a pretty good job the last 12 months getting settled things down.

Dave:
I do too,

James:
But here’s the issue I have. We had inflation a couple years ago going and he’s saying it was transitory. He’s like, no, it’s transitory. It’s fine, it’s fine, it’s fine. Now we have really no inflation going on, so he doesn’t raise rates when he should have, and now there’s not much inflation going on, which I do think is a delay. The tariff impact hasn’t hit it yet, but it doesn’t make any sense. It’s like so when inflation was high, you leave rates low. Now we don’t have the inflation going on or it’s very mild and he just wants to leave it alone and he’s afraid of what could happen. When we all felt back a couple of years ago that inflation was not transitory, we’re like, this is not happening.

Dave:
Well, yeah, that’s his legacy now is that he’s sort of kept rates low too long and inflation spiked. So maybe he’s overcompensating and is very fearful of inflation because he missed it last time essentially,

Henry:
And none of this is forever. They’re going to review interest rates again and can make a decision. So I think it’s cautious to be able to sit and wait for a little bit, see if the tariffs do have an impact on inflation, and then make a decision rather than to make a decision, lower the rates now and then have to adjust it so quickly. And mortgage rates have been coming down just a little bit. They’re not terrible right

Dave:
Now. Yeah, they are getting a little better a little. We’re not screaming from the rooftops about it, but it’s nice seeing it move in a positive direction I’d say. Yeah,

James:
It’s not at the level that a lot of syndicators were hoping it was going to be at right now though.

Dave:
Yeah, the people who need it down need it down a lot more, but for an average home buyer, it helps a little

James:
Bit. Any rate relief helps. But that’s what I don’t understand though. We all knew he should have raised rates a couple years ago. Now it feels like the point where we’ve kind settled down, why don’t we bring it down? But I guess also the jobs report, I mean, I think he’s going to keep ’em kind of where they’re at until we see some sort of break in this jobs report. I mean, more jobs keep adding in. The economy’s doing fairly well, so why would he start cutting rates?

Dave:
Exactly.

James:
It doesn’t make any sense.

Dave:
I feel like he’s taking the approach of until I’m forced to cut rates, I’m not going to where I think a lot of people, especially in real estate, want to be like err on the side of cutting rates where he’s kind of erring on the side of stopping inflation. And that is an area up for debate, which I will ask you to weigh in on. But James, actually today I saw something, a DP, they put out these jobs reports. It’s different from the government jobs report, but they showed for the first time, I think in two or three years, the first time that private sector employment fell for smaller businesses. So we’re starting to see the labor market crack a little bit continue. Unemployment claims are starting to go up, so there’s definitely some signs, but I agree with you that it’s been very resilient, remarkable about the US labor market. So he hasn’t been forced to yet.

James:
No, and I honestly, I want lower rates, but I don’t want inflation. That’s what I definitely don’t want.

Henry:
I was just going to say, what’s more important in your opinion to you and your business? Is high inflation more of a problem or a higher rate’s more of a problem for a real estate investor?

James:
Depends on how much you’re dispo at the time. So I say it changes every six months. If I’m going to market with a bunch of houses, I want low rates and I don’t mind if costs are raising, so does the price, but I want stability. That’s the biggest thing. This up and down is no good for business.

Dave:
Well, Kathy, I’ll just get you to jump in. I think what we had so far is good, so I’ll just keep going. Alright, well, obviously everyone has different opinions. As James just said, depending on where you are in your investing journey, you may care more about inflation or low rates. If you or Jerome Powell, James Fed meeting coming up in July, would you cut rates by? How much would you keep ’em steady as of today? We’re recording this July 2nd.

James:
I would leave them alone.

Dave:
You would leave ’em alone. All right. Leave

Henry:
Them alone,

Dave:
Henry, what would you do?

Henry:
I would leave ’em alone as well. I understand his position. We don’t know what’s going to happen with tariffs and if how it’s going to impact inflation. We haven’t had this.

Kathy:
Yep, me too.

Dave:
You’d leave

Henry:
Them.

Kathy:
I’d leave them.

Dave:
All right. We’re unanimous about this actually when going into this episode. I was thinking I think just a little cut, maybe just a little 25 per basis point, just a little snip like why not little nip and nip? Yeah, just a little nip on the cuts. But inflation did go up last month. Not by a lot, but by 0.1%. But as we’ve seen over the last couple of years, these things lag a lot of stuff set in motion before it shows up in the data.
And personally, I’d want to see one or two more months of data. If we see inflation relatively flat in June July, I think they’ll cut in September. I’m pretty sure about that. Right. But we got to see what happens with tariffs. Just today they announced a deal with Vietnam. Everyone’s applauding it. It’s a 20% tariff on Vietnam, which imports a lot of construction materials, by the way. So these things are starting to go into place and I think we need to see what happens there, but I wouldn’t wait too long. I do think that there’s signs of the labor market starting to crack, and especially for real estate needs some relief.

James:
I changed my vote. I agree with Dave. Just a little one because also the mental everyone’s, if you look at the, what’s going on in the market right now, stock market’s doing well. Rates are a little bit lower, but it’s a different vibe. So that little touch

Henry:
Glimmer of

James:
Hope.

Dave:
Yeah, just throw us 25 basis points. Just a little baby cut. It’s fine. Have you seen gold? Man?

Kathy:
It’s soaring.

Dave:
I know I missed that one. I’m happy about that. I own a lot of gold.

Kathy:
It’s like at an all new high. So that tells you something.

Dave:
Yeah. Well, the dollar’s weakening, which is really a whole other topic for maybe a whole other show because that I feel like understanding the value of the dollar is like a whole economic principle. Not a lot of people pay attention to, but it’s at multi-decade lows. That’s what you should know. It’s the weakest dollar we’ve had in decades. So that will have implications. Maybe we’ll talk about that in another one. But let’s move on to our second story, which is kind of related to this one. Henry, you got another Fed mortgage rate one. What is it?

Henry:
So yes, my article is related to interest rates. I don’t know if anybody saw this air quotes news last week, but Trump basically came out and said that he wants interest rates cut and he thinks they should be around 1% to 2%.

Dave:
Okay.

Henry:
It was among some other comments about that Jerome Powell should retire and yada, yada, yada. None of that’s what’s important. And I brought this article because everybody says they want lower interest rates. I think one to 2% is kind of insane. But I think we should talk about what if this actually does happen. I mean, I don’t think there’s no likelihood that it actually does happen, but what do we think the market would do if this actually did happen? How would it benefit sellers? How would it benefit real estate investors? So I’m curious to get your guys’ opinions.

Dave:
This is a fun exercise, Henry. Thank you for bringing this one. Okay, so I think we’re talking about federal funds rate at 1%. So we’re talking about a three and a half percent mortgage rate. This is fun, Kathy, James, Henry, you go for it. I have a lot of thoughts, but someone jump in.

Kathy:
Well, it’s good to want, we all want, but somehow the president doesn’t control interest rates. That’s the funny thing. So I think he’s used to pressuring and it just doesn’t work that way with interest rates. It certainly isn’t. We just talked about it with the Fed mortgage rates. It’s totally unrelated to what the president does. So

Henry:
I just think it creates this Catch 22. Yes, it would make people air quotes happy because they feel like they could afford a mortgage. But I also think that it’s going to drive more people into the market, which is going to increase demand, which means more people are going to start buying houses and that’s going to drive pricing up, which lowers affordability. And so there’s this weird seesaw where yes, rates are great and help affordability, but then that also drives up prices which hurt affordability and which one is more detrimental to the average homeowner.

Dave:
Yeah, I think it’s a really good point. Rates can help affordability in the short term, but long term they can actually be detrimental to affordability. This is basically what we saw during COVID, right? Helped everyone buy a house and now we have
A really difficult affordability situation across the us. So, okay, a couple things here. Trump is obviously trying to stimulate the economy here. I think one reason he is really trying to hammer down interest rates, has nothing to do with real estate and has everything to do with the federal debt. And so I really believe a lot of our debt turns over every single year and every time we issue bonds at four or 5%, that means that more of the federal budget every single year is spent paying interest on our debt. And if we were to lower our interest rates and bond yields actually fell, that would help the national debt deficit situation. So that’s one thing. Whether or not that actually happens though is unclear because I think if there is a situation where Trump basically forces interest rates down to 1% and investors lose confidence in sort of the Fed independence that we’ve had traditionally in the United States, bond yields might not fall that much because when there is more risk in the market, and I think most investors would see a president controlling interest rates as higher risk, then they are going to demand what’s known as a risk premium.
And that means that bonds doubt necessarily fall and follow suit with the federal funds rate. They could, but I would just want to caveat that that might not happen. I will also say I agree with Henry, but if rates went down to 3%, I would probably just try and buy as much as I possibly could.

Kathy:
But I don’t think he’s talking about mortgage rates. I think he’s talking about the Fed fund rate.

Dave:
Yeah, he is.

Kathy:
And also along with that, if the Fed fund rate went down 1%, then that would stimulate the economy. People would borrow money more for their businesses on credit cards and so forth. And that stimulates anytime money gets cheaper, people buy more. So would it translate into mortgages? It would just depend on what bond investors are doing. And that’s what I was saying earlier. Trump is a free market guy. You can’t control the free market. The market controls the market and bond investors are either going to buy bonds or not. And it depends on a lot of things, not just a command from the president. So how do we get there to lowering rates? What would have the Fed do that? Well, it’s not really things that Trump wants, right? The Fed would have to see job losses. The Fed would have to see inflation come down more, which I am not sure that the Fed is really that worried about inflation because it’s really close to the target right now anyway. It’s more about what could happen with tariffs. But for the Fed to cut rates 1%, it’s almost like something bad would have to happen in the economy. And so it’s a conflict. It’s just not going to happen. I don’t think it’s going to happen unless we see job losses.

Dave:
The other risk of it, at least traditionally speaking, people believe that you don’t want super low interest rates during relatively good economic times for two reasons. The first is that it can create inflation. So if you stimulate the economy when there’s already inflation risk, that could exacerbate the problem. I don’t know if that’s going to happen here. I’m just trying to explain the theory of it. The second thing that could go on is if you boost rates or juice the economy too much during good times, then if something goes wrong, there’s a black swan event, whatever, there’s a recession, the fed can’t cut rates any further. And so it sort of takes the tool that the federal government and the Federal Reserve have used in the past, which is to cut rates to stimulate economy, to get you out of recession. That tool is sort of taken away.
And that is why just if you look historically, the Federal Reserve, when the economy’s humming, they usually raise rates a little bit at a time over time, not to slow down the economy too much, but to give themselves some cushion in case things get bad so they can cut rates. So that’s just another thing to consider. If they go all the way down to one, I’m not saying the economy’s perfect right now, but by a lot of measures it’s actually doing okay. And so putting in basically emergency level interest rates when there’s not an emergency does come with risk.

James:
I don’t think this is ever going to happen again personally, but I know what I would do if it did. Like Dave said, I would go buy single family houses. I’d be putting my boat up for sale immediately, and then I would wait 12 months to sell off all my assets and then actually reload when the rates shoot back up because eventually it would happen. I just don’t think it’s ever a good idea. They left rates way too low for too long and we had way too much growth. And that’s what’s happening now. That’s why the markets are stalled out. It’s just too expensive. It’s

Dave:
Exactly

James:
Crazy. You get the benefit now, but you hate it later. And so I don’t think we should have ever been at that rate. And I think it was a total overcorrection during COVID, and they were trying to keep the economy pumping when they didn’t really need to, or they could have done it for a very short amount of time. And I think this was one of the biggest mistakes we’ve made in our US economic history.

Dave:
Yeah, I agree with you, James. As an investor, more than a huge runup in prices, I just want predictability. That’s the most important thing. And so if we’re having these big swings in interest rates, we’ve gone from, I forget what the federal funds rate was in 2019, but then we went down to zero, then we went up to 5.7, then we would go back down to one. This is really difficult for an investor. My dream, we’d get a federal funds rate at like 3%, and we’ve had mortgages in the five, five and half percent range. That is a stable scenario for growth without creating huge affordability problems, without creating these boom bust cycles that we’ve been seeing in a lot of markets. To me, I would rather have that.

James:
I like steady and stable. You can dictate your own return.

Henry:
Yeah, manage your business better.

James:
Yeah, it’s not luck at that point. We all got pretty lucky the last five years, and I’d rather use logic over luck.

Dave:
Alright, well we’ve talked about the Fed enough today. Let’s move on to our other stories, but first we have to take a quick break. Welcome back to On the Market. I’m here with Kathy Henry and James. We’ve been talking a lot about the Fed, but we’re moving on. Kathy, you have a total shift of gears. Tell us your headline.

Kathy:
Well, this is going to be political again, so forgive me in advance, but

Dave:
What do you got?

Kathy:
This is an article from Traded. The title is How Mom Danny’s Win in New York City Could Spark a South Florida real estate surge. And this is a blog written by a real estate agent. So it’s their opinion

Dave:
In South Florida or New York?

Kathy:
In south Florida, yeah.

Dave:
Okay.

Kathy:
Who said that? Basically within 24 hours of Mom Dani’s unexpected victory in New York, city’s mayoral primary South Florida real estate brokers were already fielding calls. The ripple effects, say industry insiders say, is unmistakable and gaining momentum. So to kind of give a little background on this mom, Donny is being called a socialist, even a communist. He was nominated as the Democratic nominee, and some of his promises include taxing the wealthy to pay for free buses, free childcare, create city owned grocery stores, freeze rent for all stabilized tenants, and triple the number of permanently affordable union built rent stabilized homes. So according to the New York Times, the real estate industry is frightened real estate industry titans are frightened. The real deal came out and said it was a crushing defeat for the real estate industry. So it’s interesting because Florida has been seeing a slowdown and this could boost it if more and more New Yorkers want to get out.

Dave:
Well, I did see this right? I think in the Wall Street Journal they had some article about all these hedge fund and Wall Street people saying that they were going to leave New York after seeing this, which definitely happened during COVID. A lot of financial firms moved to South Florida from New York,

Kathy:
Miami.

Dave:
Yeah, it definitely happened. So I could see something like this happen, but I would have to imagine it would really be in the luxury market. I think most normal folks aren’t going to flee the place that they live due to a mayor.

Kathy:
Well, I mean if you own apartments, if you have a REIT that’s an apartment REIT and you own a bunch of apartments in New York and you’re going to potentially face rent freezes,

Dave:
But isn’t it for already rent stabilized places?

Kathy:
So it sounds like the rent freeze would affect about 27% of the overall housing stock in New York City, which is and about 41% of rental apartments.

Dave:
Wow, that’s a lot.

Kathy:
Yeah,

Dave:
I didn’t realize there was that much rent stabilized in New York. That’s a lot. Wow. Okay, so yeah, so freezing the rent for a sizable portion of the rental market and then a plan to construct 200,000 new affordable union built rent stabilized units over 10 years and fast tracking approval for affordable development. So that’s what the policy states. Honestly, I have a hard time even conceptualizing how this might play out. My only frame of reference is when I was living in Amsterdam, they did something similar where they froze rents. There’s this complicated point system where it’s depending on the size and the location, you could raise your rents by X percentage. And what happened was a very dramatic increase in rents across the board. I think it went up like 30%, really dramatic because a lot of people sold their properties. A lot of rental owners, especially non-professionals, people who were just mom and pop just didn’t want to deal with this.
They wound up selling it. It reduced the overall amount of rental units available and prices went up. And I can’t say for sure, I don’t know enough about New York City dynamics, but a lot of studies have shown that while rent stabilization can help the incumbents, the people who are already in buildings, what happens to other people who are more transient and move around or new units is that rents actually go up because there’s less supply of those properties. So I totally understand rent affordability is a problem for sure. I just think this solution may help some New Yorkers but hurt other ones. I don’t know if that means people are going to leave New York City. It’s hard for me to forecast that, but I do think these kinds of policies, even if it’s the right intention, don’t have the right consequences.

Henry:
Well, and I think there’s more long-term impacts because it disincentivizes new investors to come into the market, which means there could be stagnant housing stock. That means long-term affordability gets worse. I think some current owners who have debt still end up having to sell these assets at a discount,

James:
Massive

Henry:
Discount and massive discounts, and then that hurts the quality of the assets, which then hurts New Yorkers and then economies worse over time because who ends up owning the real estate? Either people who own it free and clear and can afford to operate it, or people who are looking to cut every corner to cut every expense so that they can afford to keep these assets operating. And that means you have a lot more lower quality housing.

Kathy:
Is this a worldwide problem? Really? I was just in Venice, Italy.

Dave:
Were you at Jeff Bezos wedding?

Kathy:
I was there that weekend and I was looking for my invitation. I couldn’t find it, darn

Dave:
It. You know what, Kathy? If I saw you and Rich at Jeff Bezos wedding, I wouldn’t even be surprised at all. I wouldn’t even blink an eye. I’d be like, of course they’re there.

Kathy:
You saw the phone party on his yacht, right? I made it to that one. But the same complaints in Venice of all this big money coming in, look at Jeff Bezos bringing his $50 million wedding and we’re all priced out. And it was so interesting to be like, wow, those are the same issues we have in America

Dave:
And everywhere

Kathy:
And everywhere. And it’s the result generally of a popular place. Venice is small. There’s not a lot of room to build in Venice. So of course prices are going to go up over time when it’s a beautiful location and there’s not much of it. New York, same thing. It’s an island. It’s hard to bring on new supply and a lot of people want to be there. So I don’t know how anybody lives in New York and I’m from California, we have really high prices here, but I don’t understand how anyone can survive in New York City. And I don’t know how you solve the problem, but I don’t think this is the solution, like you said. I mean, bringing on new supply. I like that part of his suggestion.

Dave:
Yeah, I agree.

Kathy:
Yeah,

Dave:
I think you might struggle to find people who are willing to take, even if you fast track permitting. Yeah,

Henry:
Who’s going to take that risk,

Dave:
Right? Yeah. It’s going to be a riskier proposition if you can’t raise rents. Building in New York’s expensive

Kathy:
Building anywhere is expensive these days. Yeah. It’s almost impossible to make it affordable.

James:
And that’s the thing right now, it makes no sense. You can’t freeze rents, have property tax and insurance going up at the same time. Eventually you’re just going to get squeezed out and someone’s going to have to sell that building. If rates are higher and the rates are higher than what that previous owner had, the price is going to come dramatically down. But the biggest thing that makes no sense is they want to push to build these units. If you run the math on building a multifamily building today, most of the time to make this pencil, you need the land for free. Where’s the free land? And that’s with pushed rents, not capped rents. And so the problem is they come up with these ideas, but the math does not math. And so I don’t think he could actually get that pushed through. It would be very bad for New York real estate in general, but just none of this makes sense. Mathematically does not make any sense.

Dave:
It does raise the question though, James. To your point, most people agree the long-term solution is more supply. That is just economics, right? That’s how you stabilize prices. But it’s too expensive so you can’t bring on more supply. So I don’t know how this will turn out, but other examples of rent control have led to higher rents. And so my concern is that we’re going to see a lot more proposals like this because the supply side is not gaining any traction. And clearly this is a real issue. I do believe that rent is unaffordable and is a real issue. I just worry that politicians are going to pursue short-term things that sound really good, but could make things actually even worse in the long run.

James:
When you have so much regulation in how you can manage your own building, the wheels come off. We bought a house today this morning, the seller moved out. Now the seller also had a roommate that moved out, but then he decided to go back as we go to get our keys and he’s like, I’m not moving. And so there’s policies like this, and I know this is different, but it’s like now we have to go through and evict someone that was not even supposed to be there in the first place, and there’s a court order to sell the house. And so these policies do affect things and going to the point are people are going to leave, people leave, these policies don’t work. And that’s where I do think other markets could expand. They will leave.

Dave:
Yeah. Well, we are a few steps away from that. Again, this candidate Momani won the Democratic primary. There’s still a general election, and then of course candidates sometimes adjust their platforms as they get into office. So we’ll see how this one actually rolls out, but it would be interesting to watch. So we’ll definitely make sure to update you all. We do have one more story, but we’re taking our last break. We’ll be right back. Welcome back to On the Market. I’m here with James, Henry and Kathy talking about New York real Estate. And James, I think you have more New York real estate, right?

James:
Yes, it is about New York and it’s telling a little bit of a different story, and I think this is very relevant to what’s going on in the market today. And I think not just this article, but just the theory of what’s going on. And also it’s relative to me. I just bought the most expensive flip. The one I was telling you guys, I might back out of.

Kathy:
You didn’t back out. You went for

James:
It. I got a price reduction.

Kathy:
Oh, sweet. Very good. How much?

James:
400 k. Nice. They gave me some padding. Now my contractor is nowhere to be found, so I’m scrambling to put a whole new plan together. But the article is there’s one elite group propping up in the Manhattan Real Estate right now. Why? Everyone’s sitting on their hands. As we know, a lot of people that are selling properties, the market is slow. There’s not as many buyers in there. The absorption rate is low. But in New York, it’s cash dominated. In the luxury market. In quarter two of 2025, a record, 69% of Manhattan purchases were made in all cash.

Kathy:
Oh my goodness.

James:
And that’s a 23% growth from last year.

Kathy:
Somebody’s making money out there.

James:
Yes, they are. And they’re parking it in New York, the median home price went up to 6.52 million.

Henry:
Good lord.

James:
And the amount of sales over 4.5 million was an 18% increase from the year before. And so it’s the common thing I’m hearing everywhere. The market’s so slow, market’s so slow, I don’t want to buy, but you have to find the spot in the market. Now, am I going to go flip luxury condos or townhomes in New York? No, that’s probably just take it off my buy list. But what I have seen now in every market that I’m researching is there is a spot where things are moving. Even in Newport Beach, the reason I was very close to pulling out of that deal, I got the price cut and I still almost pulled out. But what I saw was there’s a good market right there. Actually sales from nine to 11 are moving pretty quick and they’re moving for cash. And I think the important thing is as we’re looking at buying property, where is the sweet spot?
When I was looking at Newport Beach, I was going to pull out even with the reduction, but I saw that the sale prices from nine to 11 were one of the hottest selling markets in Newport. Now stuff that was six to nine was actually very slow. And so there is a sweet spot, and I am not saying do millions of dollars because also in Washington Tacoma, you’re at 450000th of sweet spot. There is a spot where their money is moving and it seems to be either Uber luxury or if you’re sticking around that median home press.

Henry:
I think this is a great point for investors in general. This is just market research every investor should be doing. If you’re flipping, there are different segments of homes. That’s why I flip starter homes or first time home buyer type of homes because if they’re priced under our market average, they typically have lower days on market. That’s why I like them. Then we also have this shift where we’ve started to shift recently to where these kind of second tier homes, not the uber luxury homes, but the homes where high income earners are typically buying. So they’re buying four to five bedroom, three bathroom, 2,500 to 3,800 square foot homes. There’s been an increase in sales in those homes in our area, and that’s because we have employers that are now forcing people to move back here when they moved away during COVID and they’re just enforcing these butts and seats now.
And that’s caused a lot of people to have to move back here and then they want to buy homes. And so you really do have to understand your market at an intricate level now, more so than you did a few years ago, the ones who did a few years ago and probably made more money than the ones who didn’t understand. But you could accidentally make money a few years ago. It’s a whole lot harder now. So knowing this and then targeting your acquisition strategy to go find those deals, you can absolutely kill it in a market when other people are struggling. But you really do have to do that research and a good agent is going to be able to help feed you that information.

James:
Yeah, because in the article, the cash purchases above four and a half million, the median home price grew to 6.52 18% increase. Now financed properties below four and a half, there was only a 3% growth. And so it’s showing that that wealthy app is real right now, and you really want to go, okay, where are the people with the money going? Because the people that are borrowing, that’s where we’ve ran out of buyer steam right now. And so you just want to break down where is the growth because not all pricing’s the same, not all markets the same. And that’s the blanket I hear everywhere. If market’s terrible, well no, it’s actually doing fine in a lot of different spots. It’s certain price points that are not doing well, and that’s what you really had to dig into.

Henry:
And that is very market specific.

Kathy:
And this is why mom Donny won the Democratic ticket for mayor, because you are seeing the tale of two worlds, these extremely wealthy people that can buy New York real estate with all cash. It doesn’t get much more expensive than that. And then people who can’t afford to rent. So until this is solved and whatever is causing the wealthy to become wealthier and the poor to become poorer, Henry’s laughing. There’s a lot of reasons, but it’s been going on for a while. And if you don’t get on the boat, and we’ve said this for a long time, so often money flows to assets and if you don’t own assets, you’re not going to get on that boat, the party boat, it’s going to be gone without you because no matter how hard you work, if you’re renting, if you’re not putting your money into assets that will grow and make you one of the wealthy, you one of the 1%, it is just going to be too hard. You’re not going to become wealthy saving, or

Dave:
Especially

Henry:
Not now.

Kathy:
Yeah.

Dave:
Am I the only one who had to think for a second about what denomination James was talking about when he was like nine to 11? I was like nine to $11, hundreds, millions. Okay. Nine to 11 millions. Okay. Just making sure. All right, well, I think that’s what we got for today. Thank you guys so much for bringing these stories. We had a lot of alignment today, two on the Fed, two on New York real estate. This is rare that, as you can all tell, we don’t plan these things. We really do. Just break these stories and then start talking about ’em. So this was a lot of fun. Thank you, Henry, Kathy, and James for joining us. It was great to be back with you guys. I missed you guys over the last couple of weeks.

Kathy:
I missed you too. BB Con’s right around the corner, so looking forward to that too.

Dave:
Yes, BB Con is coming up in Vegas in a couple of weeks. If you need a discount, hit me up on Instagram. I have a secret little discount for everyone who listens to on the market. I’m at the data deli. I will give you our best discount if you want to meet me, Kathy, James and Henry in Vegas, which he should because it’s going to be a lot of fun. Henry’s in Vegas right now. He’s on a scouting trip to Vegas just to find the hot tables, best slot machines,

Henry:
And I’m doing very piss poor at it,

Dave:
So we know which ones to stay away from

Henry:
At least when we get there. Absolutely.

Dave:
All right, well, thank you all so much for listening to this episode of On The Market. We’ll see you soon. All.