B (6:43)

Quantum computing conversation, you can give me a call.

A (6:46)

The more that I read about it, the more I realize, like, what we don't know, you know, like, do you remember learning about photons?

B (6:52)

Oh, yeah, right.

A (6:54)

Like a photon's not a real thing. It is. It is a way of understanding what a thing does. It's like an explanation to try to understand what's happening, but it isn't real. I got the same vibe when I was reading about quantum computing. I'm like, I could repeat what they're telling me, but my brain cannot wrap itself around what is actually happening. And this is what we're. These guys are putting the US's future potential ability to survive on is something that I couldn't even articulate. When you grow productivity, you grow the size of the economy. As you grow the size of the economy, even if you keep the tax rate the same, you collect more taxes. I like that. Let's take a break here. I've thought. Not that anybody cares, because I'm not a politician, but rather than only focusing on paying off debt, we should put more emphasis on making more money. Like, you kind of go into offense when the country's this far behind. You're probably not going to be able to pay off the debt because the people of the country will rebel and they'll be riding in the streets. But if you can just get more production happening, more people working, more people earning, instead of raising taxes to pay it off, you keep taxes the same or lower them, but you get more people paying taxes, and so your net is higher. Do you see any correlation between that strategy and what these guys are saying where they're like, look, AI is going to come in and fix us?

B (8:15)

Oh, the AI conversation's a tough one. It's probably a mix of both. I think AI won't save us. I think from a productivity standpoint, there's a lot of pros and cons. I think ultimately it comes down to. It's like anything, right? I mean, shoes, like wearing shoes is. I had a conversation with a guy yesterday and he compared it to. To wearing shoes. Shoes gave us really weak feet, right? But they increase our profitability, our profit, you know, our.

A (8:49)

Our productivity.

B (8:50)

Our productivity, I'm sorry. And they increased, you know, how far we could run and, you know, the damages that we would get to our feet. But they gave us really weak feet. We learned to kind of evolve past that, right? Because the benefit outweighed the risk. I think the biggest thing with AI is we're kind of having like, an existential challenge where, yes, it will make manufacturing cheaper, yes, it will make things more efficient, it will make businesses operate more effectively. But those are kind of all the things that, like, give you meaning a little bit, right? They give you desire, they give you something to strive for. And I think we're playing with a very dangerous tool, right? Where, just like you said, David, I think those fundamentals, financial prowess, those things like those will never be able to be replaced fully. So those are still important to instill. Things like in your book, how to understand what you're investing in, how to make money in real estate, how to make money in whatever you're doing, how to invest defensively. We kind of talk about building this, this fort of wealth, right? And make sure you're, you're, you know, you're defending your assets, not just looking to recklessly acquire them. I think that's the kind of stuff that AI may like analyze a property for you. Or like, you know, people give me all this time like Air DNA. Oh, the Air DNA said I rented for 100k a year. Why am I only doing 50k? Like Air DNA is kind of like a very BAS level AI. You know, it's like this is what everybody else does in the market. Here's your analysis for you. You don't have to do anything. And all the people who went and recklessly bought just looking at Air DNA and getting enamored with those numbers. Some people regret it. Right, because you didn't do the proper due diligence. You know, you didn't realize your, your house doesn't have a pool or a nice view or look at all these other comparables that Air DNA was pulling. Your house ain't like them.

A (10:41)

Or to that, to that point, Air DNA can see that other properties have theirs priced at this point and they might even be comparables. But, but it may not be able to tell how often they're booking. Yeah, right. And maybe at the time, if it could tell an idea of when they were booking, a bunch of people bought in the same area and added to that market. And now the demand for yours goes down because it's spread amongst all this extra supply, Air DNA can, can give you a snapshot maybe, maybe of what to expect. Same as his estimate. You know, like, yeah, your house is worth 900 grand. Why? Because the one down the street sold for 900 grand. But what do you do when there's 15 houses for sale and nothing pending?

B (11:18)

That's right.

A (11:18)

You can tell yourself it's worth 900 grand. It will not sell for 900 grand.

B (11:23)

And that is exactly what you just did there. That's the human element. Yes, right. That's where you can look with your eyes. There's still a job for you to do. You can use all these tools like the Zestimate has a purpose, but it's almost like a proof check, not what you should base it, rely on. Yes, correct. I think that human element is always going to be so important. Now maybe we get to a point where the AI thinks for you. I, I would hate that, but maybe we do. Who knows? This thing is exponentially growing.

A (11:51)

Well, you Know what will happen? We'll get weak minds. Like, we got weak feet. That's what will happen. Yeah. Is that where you're going with the weak feet?

B (11:58)

Yeah, and it's. It's just, you know, is. Is it worth having weak feet to run a little faster? You know, and that's. That's the decisions that we're gonna have to make as. As people, as investors, as partners, as friends, as family members. Like, do we want to have weak feet? I mean, are we okay giving up that thing that once made us strong for maybe a little bit more efficiency, but now we're super weak, and, like, what if the power goes out? Like, will we be able to think? Like, can you think if you lose your tool? Like, what if you couldn't wear shoes? Could you run over rocks right now? Probably not, dude.

A (12:32)

I can't even go outside on my porch that has, like, little tiny pebbles. It's aggravated. Yeah, it's so bad for me, dude. But here's the thing. If you didn't wear shoes, you would get pushed out of the job market because you wouldn't be able to keep up with people that had them. So if you want to have strong feet and you want to keep up, you have to wear shoes when you're at work and then train in your bare feet at other time. Like, you got to do more work, right? So if you're going to use AI if you're one of the people that are listening to this and you're saying, it's happening, I can't get behind. I have to use it. Fair now you got to go train your brain. You have to make it work in other ways. It's very similar. I've often thought about. It's kind of bizarre if. If you went back 3,000 years and you showed a human and you're like, yeah, I have to make time out of my day to go lift weights. They're like, why are you lifting them? Where are you putting them? And I just put them right back down where I picked them up from. Yeah, you're just, like, on purpose burning calories? Yeah, I don't want to get fat. What? You're worried about getting fat? Like, you're going to die. You're burning calories, and you're not getting any food. Like, their mind could not fathom why we would intentionally exercise because they were exercising all day and worried about dying. It's sort of like that. Like, we have so much information that you have to go out of your way to. To work your brain. Rather than just letting someone tell you what to think. And that's why we have podcasts like this one and that's why we talk about these kinds of things. Also, if you're a Realtor listening to this, or if you're a mortgage officer that knows Realtors, please send them to davidgreen24.com and have them use a chat option to get a hold of me. Christian and I are looking to hire more loan officers as well as more Realtors, and I am training them myself, giving them information about how to price homes, how to have the conversations with your clients about where it should be priced, and how to have conversations with buyers. Because what most people do, like you said Christian, is they run an AI thing through RPR and it goes, here's what your house should sell for. They take that, they laminate it, they bring it on a listing appointment and they go, here's what the computer said to do. And they just hope they're just smoking that hopium. Yeah, hoping that the house will sell rather than reading the tea leaves, which is what we practice. All right, we got another article here about mortgage rates slipping and why that's not sparking a housing demand, which is interesting to me. Mortgage rates are headed lower, but that might not matter for would be home buyers. Mortgage Daily on Tuesday pegged a 30 year fixed rate at 6.17, the lowest since the mid September drop in the run up to that month's Fed reserve, beating the 10 year treasury yield which most mortgages rates sorry, with which mortgage rates often move fell Tuesday afternoon to 3.961, its lowest level in just over a year. What that means, Christian, if I understand correctly, is that people are rushing to the safety of a Treasury yield and so they are not having to offer as high of a return to the investors who are buying.

B (15:16)

That's exactly right. The yield goes down. That means the investor will still buy it with being paid less return, which means the cost of the bond will go up because there's a surge of investors wanting to buy them.

A (15:28)

That is exactly right.

B (15:30)

As cost of bonds, I'm sorry, go up, the yields go down.

A (15:34)

So when you see them offering a lower rate to buy a Treasury, it means they don't need your money as much. There's a lot of other people that want to do it when they're raising the yield that they're paying you. It means we need to entice people to buy these things because nobody wants to pay a higher interest rate to a borrower than they have to and that usually means when you see this, that people are worried. They're like, ooh, I don't want my money in the stock market. I think it's going to collapse. I don't want my money in housing. I don't think it's going to keep doing better. I want safety in exchange for profit. The decline might not do much to move buyers into action. Home buying sentiment in September, the most recent month available, seemed relatively low. With 73% of respondents selling Fannie Mae, it was a bad time to buy. Christian, you don't know this, but I was recording earlier today doing a David Green show, and one of the things I talked about was that there was someone. We read a comment from YouTube. It might even meant from a mortgage Monday. And the guy was like, you're so negative. All you ever do is talk about how, like, real estate isn't going to do great if they drop rates to the fives. We're going to have bananas. It's going to go bonkers out here. And my case was, I don't know that it would. It would certainly be better, but it would. I don't think it would lead to the crazy market we had in the past. And my, my logic is there is not a lot of capital looking for a home like what there was before. There's not a lot of people that are like, I want to buy real estate. It's going up, the cash flows going up. And a lot of that's related to the job market. Like, even if people are not. There's not high unemployment, but the jobs kind of suck. People lost their $120,000 a year job and now they're working at Uber or they're working at a restaurant. So there is not as much money to go around. I don't think there's as much irrational exuberance for real estate as what we had. So rates going down might stabilize. The people that already own it, they could refinance. They could get a lower payment. That would give them some breathing room. It might make it easier for a buyer to get in. But I don't think that everyone would rush into real estate. Before we read the rest of the article, do you have a contrarian opinion or do you see a similar.

B (17:37)

I think this is fun because we can, we can kind of go through a thought exercise here of if we believe lower rates will create a frenzy by inverse, that means that increasing rates would create a winter. Right? And if you guys know anything of from 2020 to 2025, when rates tripled did it create like a buying winter? Not really. Houses in a lot of markets in America were still flying off the shelf as rates got as high as tripling from 2%. Even more than that 2% to 8% quadrupled.

A (18:13)

Right.

B (18:14)

Why were people still buying if rates is the only thing motivating home buyers? So I would have kind of a line on your side of this topic, David, is that I'm not sure that a 5% rate would create a frenzy. I think it would help. It would create an opportunity for more people to buy. But do I think that, like I said, if that were the case, rates would be the only impacting factor where if rates go up, people stop buying and if rates go down, people start buying. And that's not actually what we see in the data. It's, it's not, it doesn't, that's not what tracks. So I'd be on your side of that, David. I think it will help, don't get me wrong. But it's one factor in a long line of factors that impacts the housing market. Right.

A (19:00)

And just nobody talked about them. And part of why I think that some few YouTubers actually discussed, which is where everybody gets their information from, it's from somebody's YouTube channel. It's. They don't know themselves what drives markets. They either haven't been around real estate long enough or they don't have the perspective that you and I have, which is frankly unique. So we own real estate, we're investors. That's most people making content. Well, we also are real estate agents that sell houses. Not a lot of these guys are agents and investors. A handful of them could be. There's some people out there that do both. Well, we also do mortgages. So we see financing, we see loan applications coming in, we see what people say they want, we see where they're going and where they're not going. Because we're in every single state. Most people making content are in one area. They're in this city and they know what's going on in their market. They know the Seattle market, they know the Miami market. They know the Detroit market. They don't see all 50 states. We know what's going on in Hawaii and we know what's going on in Maine and Rhode Island. And then we also, like you, I didn't do it. But you were an insurance broker. You see what the insurance costs are like for real estate. I don't just own real estate. I flip houses. I have short term rentals, I have long term rentals I have a property management company. I see that too. The perspective we offer is very, very well rounded. And so I can see interest rates alone don't fuel housing costs, because you just said earlier if they did, prices would have come down when rates went up. This is what every goofball was out there screaming, rates are going up. Wait for the collapse, prices are coming down. It never happened. No one got held accountable for saying that. The house just sat there, the transactions went down, the prices did not. If we want another crazy run, you have to have a healthy job market because people feel confident taking on debt. You have to have few options with where to put your money. So it all goes to real estate. You have to have a lot of extra money in people's bank accounts so that they have the big down payments. You have to have the lower rates. That will help. And you have to have transactions happening because usually you got to sell one property to get to the next one. So somebody has to want to buy your property. Then you have to have people that have paid off their debt and they have to have reserves. I don't know that we're close to that right now. I'm looking at the people I talked to over the last two years, three years since rates went up. Their debt's higher than it's ever been, their reserves are lower than they've ever been, their job is crappier than it's ever been and the fear is higher than what it was at the time. We still have some tax benefits, real estate, that's one of the things that we used to have that we still have. But there's not a lot of the other factors. So I don't know, but I just, I don't know why every time my gut instinct ends up being right. I think if we lower rates, you will see relief for people that have the real estate. So that will stave off foreclosures, it will allow them to keep spending money, it will keep people alive, it will stop a crisis, it will not fuel a crazy boom. Because everyone's been watching the last three years of pain. I don't know that everybody wants to jump into that unless they're ready for that smoke. Whereas you used to watch 10 years of everyone on Instagram talk about all the money they made. 24 year olds with 16 units under contract in their first year. These huge wholesaler checks, like that's what everyone's looking at. Of course they all flood into real estate. The last three years have been kind of brutal. I don't Know that everybody's going to jump into it like people are thinking there. And that's just coming from the perspective that we have of seeing a little bit of everything when it comes to real estate. The article says that home buying sentiment in September, the most recent month available, remained relatively low, with 73% of respondents telling Fannie Mae it was a bad time to buy. Typically, lower mortgage rates resulted in more housing demand. President and CEO Ryan Marshall said on a Tuesday conference call. The same can't be said for the recent drop was shaved more than 0.75 percentage points off mortgage rates since the end of May. The buyer response to the decrease in interest rates was more muted than we experienced in other periods of rate declines. This is literally what you and I were just saying. They drop rates 0.75, which is a lot. You're almost at a full point and buyers did not jump in. I would imagine refinance applications went up and I would imagine refinance applications would have went up even more if people didn't think rates were going to keep dropping. Do you want to weigh in on if you think that's the reason why we haven't seen buyers jumping in?

B (23:18)

Yeah, I get, I get this a fair bit. Hey, I want a refi now. But I think you wait. Happens all the time. They asked me my crystal ball, right. Which I don't have one full disclosure except David's head. Sometimes I rub his head.

A (23:37)

It's been right so far, man. This is the price. This is my benefit for having to be bald is I happen to be able to predict the future.

B (23:43)

Yeah, you got a mobile crystal ball everywhere you go. No, but in all reality though, everybody kind of has like a, like a point where it makes sense. I have a guy right now that we've done a refi for like I think it's like every three or four months and he's kind of dollar cost averaging into his interest rate. Be careful if you do that right, because there's, there's cost of every refinance. But for him it makes sense because how much do we save? But my overall answer is I can't give blanket advice that would apply to everyone equally. But we can analyze your numbers, right? If you have a sub one year break even period on your rate savings, it makes sense, right? Just because it's projected to maybe come down further doesn't mean you shouldn't take advantage of that now because there are a huge percentage of people who during COVID were expecting it can keep going down right when it got to 4%. Oh, but I can get a 3 when I got 3%. Oh, I can get a 2 when it got 2%. Oh, I can get a 1. Right. I can get a 0.5% interest rate. And they never bought, they never refi'd, they never did anything. Right. And now they're sitting there saying, how did I not do it during COVID Well, you were scared then, too, right? There's always something that if you're looking for reasons not to take action, move forward, get good advice. There's always going to be a reason not to do it. The goal is to educate yourself in a way that you can have more reasons to do it instead of more reasons not to.

A (25:14)

Right.

B (25:15)

And that's not just a sales pitch to go buy property, because I don't believe everybody's in the position to buy it. But with proper analysis, with defensive, fundamental approach to investing, and obviously interest rates continuing to trickle down, it could start to make more and more sense, hopefully for more and more people. Right. And we can make more of the American population a proud homeowner, which has always been the goal.

A (25:37)

Right. That's awesome. At the individual buyer level, I think the uncertainty is the bigger issue, says Fran Tantoni. If you have someone who doesn't feel stable in their job, they're probably not going to go through with the home purchase. Yes. I don't know this guy. I don't know if you and him in Vegas are eating cannolis and drinking champagne and throwing around dice on the roulette table, but I'm here for it. I like his perspective on this. I think that he is looking at the big picture, and he's one of the few voices that's saying what we should be saying. This does not mean you and I know everything. Like, I couldn't tell you the data that you should be looking at to decide at what point unemployment needs to hit a thing, or I don't know the metric to look at that says how much money someone has to be making this year compared to last year before they do it. But I know that's what people make decisions by, and I don't feel it. I don't see people that are like, man, I'm raking it in right now. I see people every week dming me and saying, I just lost my job. I see people saying, I want to work remote and I want to make the same money I made at the job I had before, and I don't want to have to learn a new skill. What can you give me. They don't have the level of like urgency that a person needs to understand what we had before was not normal. There needs to be an adjustment to this and those people are not going to feel comfortable to go buy a house. There are still people that are buying real estate. There are still people that are doing it. These are kind of the people that were doing it before bigger pockets came around. They were already going to be buying real estate. They're committed, like you just said, to buying good deals and just they don't really care what everyone else is doing. They keep doing it. But the mob is not in the market like what they were before. So I don't think we need to worry about having a big crazy run up. I think we just need to worry about like what you said, managing our own finances responsibly, not getting caught up in the fomo, not getting caught up in the rat race, not getting caught up in what everyone else is doing, buying the deals that you think make sense and continuing to save money. Thank you for joining me today. I think this is really good and I thought that was a great article about what people should do. So if that's true, that rates come down, it seems obvious to me this is a refi era, not necessarily a go buy up the entire block era. What do you think?

B (27:52)

Yeah, I agree. I mean I always kind of remember this, this, this happening on one of my first times when we were back on, on bp. I think it's when you and Rob first brought me on after you and Rob were co hosting and you guys asked me my opinion. I said something a little controversial and I said back then, I think that was 2021, 2022. And I mentioned if you didn't buy real estate in the next five years, I'm not sure you ever will. And I remember BP was like, you can't say that. And I'm like, well you think about it and just we're seeing this unfold right now. Dropping rates is not leading to a demand for purchasing, but it's leading to a huge benefit of people who real estate. So all the people who got in the last three years are now benef. They're the ones benefiting from dropping interest rates. It's not necessarily new home buyers. Right. Because those are less. There's not that demand still. We're not seeing the surge. Now maybe you hit a breaking point where if we get to 3%. Sure. But I think that just like you said, David, I think the huge benefit is from the people who have taken the action, invested defensively, intelligently, with proper advice, and now they're getting the relief of, hey, we bought the property at a low price because nobody wanted it. Now we're getting the same rates of people getting primaries today, and we didn't have to wait. And we've been building equity for three years. We've been increasing our rents for three years. We've been value adding the property for three years. And I still get the same interest rate as the guy who waited and never made moves. Right. And still that guy from this data is still not making moves. Right. Because home buyer demand is not up. So, you know, you just keep that in mind. Right. The people who, who make, you know, I think it was Warren Buffett who said, you know, be aggressive when others are fearful.

A (29:38)

Yeah.

B (29:39)

And fearful. And fearful when others are aggressive. Right. We're seeing that. And this is a perfect situation where the people who were aggressive when others were fearful are now benefiting from the reward that they're seeing with dropping rates. So keep that in mind when you're looking at the next property that, you know, you think it'd be a really good opportunity, but you're scared, you think rates will go down further, somebody's gonna buy it, Right.

A (30:00)

Well, here's the deal. Rates move, homes don't. Yeah, you don't have. Every six years, you get to pick your home up and put it in a better location or like, pull cash out of the home itself. You can do that with the equity in the home. And rates do go up and down. So if you don't love your rate, but you do love your home there, it's not guaranteed when, but it is guaranteed rates will go up or down. And so maybe if you're at 3%, you're never going to get to there again. But if you bought a house at seven when you thought, I'm going to wait till rates go to six, you probably made a good move. As long as you bought a good house. That is the key. You buy houses where the rent covers your mortgage. You buy houses in good locations. You buy houses in areas where tenants want to live. And you build your skills at managing them or finding other people to manage them for you. You survive. And then to the victor go the spoils. When rates do drop, boom. You can cash out, refinance, you can get money out of it. You can rate in term, refinance, drop your pay. You could do a little bit of both with all the information that we share with you here. And that's what we want to see for all you guys. So thank you for listening. Thank you for joining us today. If you want some strategies on how to take advantage of what we're talking about, go check out my book, better than cash flow, the 10 ways you make money in real estate available on Amazon. You can just look it up and you'll find it there. It's not published through Bigger Pocket, so you won't find it on their website. And if you want to talk to this big brain stud of a man, Christian Bachelder, you can hit him up at the one broker, the_one_ broker on Instagram. Or you can email our company intake at the One Brokerage and get a free consultation set up with one of our loan officers. And then you can get a hold of me directly go to my website, David green24.com and hit the chat button. And you will be talking to me myself. I need to check my messages actually when we get done recording here and see what came in. And then I will be blowing up Christian's inbox, connecting him with the people that have questions about loans and want to save money. If you are at a 7% loan or more on a primary, reach us about refinancing. We'll save you some money. And if you're at 7 and a half percent on an investment property, do the same. This is David Green, he's Christian Bachelor. Together we are the One Brokerage and you are awesome. Thank you guys. We'll see you next week on Mortgage Monday.