Kevin O’Leary and The Collapse of the Real Estate Market

This is episode number 262 of The Homeowner Show. Whether you're DIY or looking to hire, we're here to help you find the best information and options for you and your home. My name is Kevin Hackett, and here with me is Craig Williams.

Hello, hello, hello, and welcome to The Homeowner Show. We're so glad you could join us for another episode live from the studio. I'm gonna press the button, hang on one second. Ah, all right, got it.

That's all done now.

Yeah, what's going on, man?

Well, you know, first of all, I got something like weird in my ears. Hold on just a minute.

Yes, okay, you got to adjust it.

Yeah, the thingy thing.

The thingy thing.

It's because we don't have the Rizzler with us.

Yep, he does. He's not here to fix things for us.

That's right.

Well, it's slacking off and sleeping for school in the morning. That's what's going on.

Well, we don't allow that, but 10 demerits. I do have, um, 3 very important things to discuss.

Oh yeah?

Number one, uh, where's your bobblehead now?

Oh, it's in the house. I just hadn't brought it in.

It is unnecessary. It's just—

Unnecessary? No, it's— the whole, the whole point of the bobblehead is to annoy you.

Well, it's— it, it doesn't annoy me anymore. Uh-huh. Just, they're irrelevant.

Okay. So your, your mood is based off whether or not your team is winning? Yeah, pretty much. That's because you're a loser.

Actually, not today, sucker. But I will say this, number 2, how'd the Cowboys do today? Oh, well, they were awful, but that's because they started Dak, so whatever.

Um, okay, so let me ask you this because this is, this is something I, I find interesting. Um, college teams make sense to me.

Okay.

Because if you went to the school, you're probably gonna support that team.

Yeah.

I don't understand being loyal to professional baseball teams or professional football teams or basketball teams.

Okay. I don't like—

because like, you don't live in Dallas.

No.

But like, that's your team.

Yeah.

Why?

Um, for me it's because it was my dad's team.

Uh-huh.

Like, I grew up just loving it and being a— like, we watched those teams.

Uh-huh.

growing up, and that's, that's the reason.

But like, when they stink, why not just like abandon ship and go cheer for somebody that's actually winning?

Uh, do you know anything about me? I'm, I'm awfully loyal.

Well, no, I mean, that's, that's why I'm asking, because it's like, it's kind of a silly thing in my brain. In my brain, it's like, okay, like, there's— they stink, you don't like what they're doing, right? Go find somebody else.

Yeah, it's just not me. I'm loyal to a fault.

But like, that's not a reason, you know what I mean? Like, just being loyal to a fault, I mean, okay, like, whatever. But I mean, like, you wouldn't do that with like a restaurant. No.

Like, no, that's true.

The restaurant was good and now it sucks. Yeah, I'm gonna sit here and eat this meal anyway. Yeah, that makes no sense to me. Okay, so it's not a criticism.

I'm fine with that.

I just don't understand it.

Yeah. It's probably why you don't like professional sports.

No, that's not why. No, that's actually not why. I, I dislike professional sports for a whole other reason.

Okay, um, what is that reason?

Oh, like all of the player strikes over the years. Oh, they lost me back in like the early '90s.

Yeah, whenever it became like position loyalty way more than it did like team loyalty or anything like that. Like, and like, and just being like, look, we're— we want more money and more money and more money and more money. Yeah. Yeah, I'm like, I get it.

Yeah, I'm just not interested anymore.

Yeah. So, so that's going to happen with college now too. It might.

And if it does, I'll probably just turn it off.

With the NIL, I mean, it's already starting.

Cool. And I'll, I mean, like, I'll, I'll, I'll take my time and my dollars and I'll, I'll have way more free time than all y'all suckers. That's true. Uh, that's true. I like, I don't miss it at all. I, I enjoyed it back in the day. Like, I got, I was really into the Rockets back in the '90s when they had like—

When they were a lot— Hakeem Olajuwon.

Yeah, they were fun. I was like, yeah, with Drexler and Olajuwon and, uh, even when Barkley was on the team, that was fun.

Yeah.

Um, I remember all that stuff. It was fun. But like, I don't, I don't miss having to waste my time just watching other guys run up and down the field. Yeah, I just don't. Um, I, I, and I, I don't say that to like take, like throw shade on anybody that does. Like, if that's how you want to spend your time, that's how you spend your time.

Sure.

Um, just not interested.

Yeah, but number 2, you ready for number 2?

I'm ready for number 2.

Second one is—

I will be bringing the Bregman statue back in.

Okay, well, it won't annoy me any longer.

Yeah, and like, I, I seriously couldn't even tell you what position he plays.

It doesn't matter anyway. Uh, okay, uh, the second thing, last night Well, yesterday was your birthday.

Yesterday.

Happy birthday.

Thank you.

And we, we had to get together for you.

Uh-huh.

And my, my wife was here along with lots of people.

Right.

And she had a revelation.

Okay.

Last night. And that was that we've been doing this podcast for 5 years.

I remember that because someone, someone was asking us about it. And they're like, how long you guys been doing this? 5 years back in September. And she's like, from across the room, there is no way that you guys have been doing this for 5 years.

That's right.

It's like, no, yeah, we've been doing it like every week for like 5 years, right?

And she was like, she was like, I literally thought it was about a year. And I was like, what, it's 1 year?

Yeah.

Like, whenever you start thinking 5 years is equal to 1 year is whenever you know you're getting old. And I can safely say that because The second revelation was that she's never, ever listened to a single episode.

And I hope she felt immensely guilty about that.

Well, she did. And let me tell you why I know that is because we were driving home from church today. And she goes, so something I'm going to do this week is listen to a couple of your episodes. And I was like, oh, really? And why? Yeah, she was like, well, now I feel a little bit horrible that you've been doing something for 5 years and I've never listened to it.

Do you think, do you think she feels like she was outwifed?

I strongly doubt it. She's like, so not competitive.

Me?

I'm the competitive one. But like, no, she was like, no, whatever. I, I, I'm gonna finally listen.

Yeah.

I was like, well, don't feel guilty about— I don't really care.

Yeah. You, you've gotta, you've, you've almost, you, you gotta work hard to like out-fan our wives.

That's so true, man. Like your wife's at least listened to like 5.

Something like that.

But, but I told her, I was like, look, we're on episode like past 250.

Yeah.

You know, there's only 52 weeks in a year. Right. So do the math.

Counting helps. Yes.

Count. Yes.

So, but like, let's also be honest, like my wife is not listening because she likes the show. She usually tunes into like the first 15 minutes to make sure I'm not doing something embarrassing.

Sure. I, that's fair.

Which is why I wait to do the embarrassing things at the end of the show.

That's right.

Till the end.

But, uh, man, it was fun, like reminiscing just for a minute with some people that weren't familiar with like how the show started and all that kind of stuff with like how Random it all began. Yeah, if at least it felt that way.

Well, yeah, and, uh, well, I am random.

Well, I know. Anyway, all right, you ready for number 3?

I'm ready for number 3.

It is an extremely, um, nerve-wracking and unsettling feeling whenever you drive home and there's a fire truck at your house.

There's a fire truck at your house last night?

This was Friday.

Friday.

Friday.

Um, I thought you meant when, like, you left last night.

No, no, no.

Okay.

This was— this was Friday.

Okay.

So I'd taken my dog to the vet. Time for her annual checkup. She's fine, by the way. Um, and when I left— so those people that don't realize, like, it has been extremely dry right here in Houston. Um, so much so that we've had a fire ban, which frankly just doesn't happen all that often. But we had a fire ban, and so we couldn't do much. But we had a bunch of limbs that, that came down. I don't remember when it was, like maybe, maybe 3 months ago.

You talking about the windstorm?

Huge windstorm. And, uh, we had a ton of limbs that came down, and so we, we piled them all up, and we were just like, well, I a lot of them were still green. So I was like, well, we're gonna have to sit it here for, you know, a month or two before it's really gonna burn well. And so, but then we couldn't burn it. So it's just been this huge pile. And, uh, anyway, my mother-in-law was like, finally the burn ban. So this last week we had like 3 days of really good rain, right? Um, and so they lifted the fire ban and my mother-in-law was like, hey, do you think we can go ahead and start burning some of that

some of that wood? And I was like, yeah, I mean, there's no reason. We got a big fire pit and, you know, I'd be fine. And she said, okay, I think I'm gonna do that. Well, when I, when I left, she had started the fire and it was burning in the fire pit as it should. When I come home, there's a fire truck at my house and I'm like, what in the world has she done?

Oh no.

Because I knew that there was a fire going in the back. My thought immediately went to someone called the fire department. Like some yahoo over here is like, I see smoke, and, uh, called the fire department. And so I see 3 firemen walking down the drive as I'm pulling in, and I'm like, okay, that's exactly what happened. Like, someone just called the fire department. Well, I get there and I go, hey man, is, uh, is everything okay? And he goes, he goes, yeah, um, burning some limbs back there and the fire jumped. And I said, the fire jumped? He said, yeah, it jumped into the wood pile. Oh no.

I was like, all right.

He goes, they're putting it out back there. I was like, oh my goodness. So I drive back there and they got the they got a, like, an F-550 back there, like a— but it, it, who knows how many gallons that thing has on it. And, uh, and sure enough, like, I, I went over there, my mother-in-law was like, like, well, we got more burned than I expected we would. And I was like, yeah, it looks like you burned about half the pile. And they were spraying the tree. I was like, did, did you burn the tree too? And she was like, well, one of the limbs started burning. And I was like, oh my God, at least it

didn't like move toward the house or anything like that. It wasn't super windy. But what happened— and this just like, I, I don't, I don't blame her at all. I probably would have done something very similar. And she was like, but it is my— it was completely my fault. And I was like, what do you mean it was your fault? Like, you— did you like take a limb out and put it over in the woodpile? Like, what did you do?

Fire dancing.

Yeah, right. She said, well, like, the— I, I was kind of trying to wind it down. And so everything was, was below— like, there's like 3 stones on my fire pit. She said it was down like below this, the very first stone, and there was just like hardly anything left. And it was just like coals, basically. And so I went and I took a shower. Took a shower, got ready. I had somewhere I had to be. And, uh, I looked outside and there were flames shooting out of the, out of the woodpile.

Oh no.

And I immediately called the fire department. She said, she said they got here really fast. She said from the time I called to the time they showed up was probably 5 minutes.

Oh wow.

Yeah. And so, and the guy was super nice. I mean, he, he was like, look, honestly, it's just still too dry. He said, I know the fire ban's lifted, but it's still just too dry, right? He said, you know, it, it could have happened, you know, spark— literally one little spark could have, yeah, flown out and boom, there was. But the fact that she wasn't attending it, yeah, and hadn't like put any water on it or anything, um, lesson for anybody out there, just make sure your fire's out.

Yeah.

Before you walk away, period. like, yeah, oversaturate that thing. Because like, if you see any smoke, there's an old adage, right?

Yep, yep.

There's smoke, there's fire, right?

I mean, I don't know if you remember, like half the back pasture burned one time.

Oh, I do remember that.

Yeah, it was— I mean, like, and we had like 4 fire trucks. Yeah, it was nasty.

I do remember that.

So, and like, I wasn't, I wasn't even home. I didn't start the fire. We're not going to talk about who did. Um, I just remember I got a call from a neighbor who I didn't particularly enjoy. Yeah, thankfully he's moved on.

Yeah.

Um, but I just remember him calling me, just like cursing me out, like, your place is on fire. I was like, sorry, I'll be there as quick as I can.

Right, right.

It's like, what do you want me to do?

No, I mean, and that's, that's the one of the things about this though, is like it's completely helpless feeling, right? And thankfully we've got really great people that are firemen out there that It's like a public service at this point. I pay taxes. It didn't cost me anything. I didn't— yeah, I didn't lose anything valuable. The tree's not gonna die. Like, everything's fine.

But we took them a batch of cookies though. Hot tip right there.

Oh, that is a good tip.

Yeah, I mean, because like, you're right, it doesn't— it doesn't cost anything. But like, those guys came out there and, you know, took care of stuff for you. Yeah. And it's like— it— like, I, I ended up saying like, hey, what's— what's the bill, man?

Right.

And he's like, no, dude, like, this is what we do. Yeah. And I'm like, I was like, can we bring you dinner? Yeah. And he's like, nah, not really. So we just, I mean, we baked him cookies and took him up there.

That's not a bad idea. So, well, anyway, so those were my 3 things.

There you go.

Crazy, crazy, crazy day at the Hackett house. Like, I'm just really glad it wasn't windy that day or like something worse.

Yeah. So yeah, it could have been way worse.

Could have been way worse.

Glad she's okay.

Yeah. I mean, I, I was actually really concerned that she was like freaked out, and she said, I, I was a little freaked out, but she was pretty calm and cool. She was kind of laughing by the time we got there, you know, kind of joking about it. But—

Did she try and put it out herself?

Uh, well, she definitely did get the hose, and you know, we've got a— so for our little backyard area, we've got one of those little— so it's got the multiple heads on it, and she turned it on to the, you know, the highest power or whatever, and and started like trying to put some water on it, but obviously it's not gonna do anything. I mean, it probably, it probably bought a little bit of time, but yeah, but no, nothing, nothing major. So, but she was fine. So anyway, how are you?

Good, man. We, um, did I, did I tell you about what we did yesterday before y'all came over? Like me and, me and the boy? No.

Yeah, you did.

Yeah, yeah. Did I, did I tell you about like when we got there? No. So we tell everybody what happened. Well, so, like, my wife asked me what I wanted to do for my birthday.

Yeah.

And I was like, honestly, I just— I want to saddle the horses and I want to go for a long ride. I think I'll go up to the brewery.

Yeah.

Because I knew they were having— they always have Oktoberfest on my birthday.

Yeah.

And so they were having Oktoberfest and it's always like a big to-do out there. There weren't as many people this year because it was just still hot.

Oh, yeah.

But they had the Oompa band and everything was going. So me, me and my son, Gatchell, saddled the horses, and it's, I mean, it's probably a, was that like a 4-mile ride?

Yeah, probably.

So 8 miles round trip. So we get there and he's having a blast. I mean, you know, it's, I mean, he's 10, right? And but like riding a horse on the side of the road for him is freedom.

Sure.

You know, it's like getting a car. Yeah. So he's just having a blast and We get there and Chris, the GM, he's super stoked to see us riding up. Like, nobody's ever come up on horseback before. And so he sets us up and we're just standing there talking and all of a sudden, like, all these little kids start gathering around us and I'm like, oh, this is an unintended consequence. Yes. So like every little kid, and there's a bunch of little kids.

Oh yeah.

Like every little kid wants to come pet the horse.

It's a really family-friendly brewery. Yeah, really is.

I mean, that's kind of their Their thing, right? So it's a family place to hang out.

Yeah.

So anyway, all these little kids start coming up to us wanting to pet the horse. What's the horse's name?

Ba ba ba ba ba.

So you know a bunch of the little kids clear out, and my son is like I'm standing there, you know, talking to families and glad-handed people and just you know letting them pet my horse, right? And I didn't realize like behind me, like my son's doing the exact same thing, except now there's like this gaggle of little girls.

Oh yeah.

All around him.

He learned something yesterday.

And and so, like he's standing there, and I'm like, "Hey, buddy, you want me to? You want me go get you a root beer?" And he goes, "Yeah, yeah, yeah, yeah, yeah.

Go on, Dad.

You don't need to be here any longer, Daddy." And I was like, "You want anything to eat?" He's like, "Yeah, whatever." And I'm like, "Okay, bud. I'm gonna go tie my horse up." Okay. So I tie my horse up. I go get something to drink. I get him something to drink, and I get some food. And I come back with his drink and I'm like, hey, bud, here's your root beer. And he goes, just go put it on the table over there.

Oh, my gosh.

And he's hot and tired.

Sure.

But he has got these girls' attention.

Oh, yeah.

And I was just like, oh, this is not good. He is connecting dots I did not want him to connect this early. Yeah.

Wow.

So I posted it up yesterday and I was like, my son learned a thing today that horses attract girls.

Yeah.

Lord help me.

Oh goodness.

And because he— I mean, like, he's kind of girl crazy at a young age anyway.

Yeah.

And I'm like, this is not good. This is not good.

Yeah.

He's gonna manipulate this.

Yeah. Oh yeah, as often as possible. Yeah.

And like today on the way home from church, he's like, hey, you think tomorrow when you get home from work we could, you know, just take a ride to the brewery? And I'm like, bud, it's closed on Mondays. And he's like, Oh, really?

Yeah, he's like, surely some girls will show up if I get a horse.

And he was like, well, maybe we can just ride around the neighborhood. I'm like, maybe we can, maybe we can.

Oh, that's, that's, that's really good, man. That's really funny.

That's good. Uh, yeah, he's, he's never been so interested in the horses before.

I don't think I've ever told you my, my, uh, horse story from, uh, you gotta, you gotta enunciate when you say that.

My horse.

I'm gonna get an old horse story.

Uh, sorry about that. It's either horror or something else terrible.

Exactly. Um, so I was reffing, uh, this— I mean, so I— this is the first year in 21 years I haven't officiated football. Like, it's, it's something I've done for a long time. I started when I was in college. And while I was in college in the Abilene area, there's a bunch of these little bitty schools. And this one, it, it was this consolidated school that probably had like 45 kids there total, right? They were playing this other small school. It was a little 6-man game.

6-man football's fun.

Oh, it's so much fun. Like, some people, some people don't like it cuz they're used to 11-man football, but man, 6-man football is so much fun.

Yeah.

And, uh, so, so I'm there. I mean, I, it, I think it's my second year officiating and we're just, we're, we're just about to do the coin toss. I mean, maybe a minute away from the coin toss.

Mm-hmm.

That, and it's, it's kind of starting to, it's dusk, like the sun's starting to go down and I, I see something off in the distance. I mean, we're kind of in a pasture as it is, right? I see something and I'm like, what is that? And, uh, we— so we do the coin toss, we do the— we do that, like the first series happens.

Yeah.

And the next thing I know, there's these 2 horses up on the end line with these 2 people riding them, and they just put their arms up on the horse and they just watch the game. The entire game, they just sit there on the horse and, uh, The final buzzer goes off, they turned around and they just walked away. And it is black as night. I mean, it is dark, dark, dark, dark.

Yeah.

And I'm like, how are they gonna get home? Like, there's no— they don't have a flashlight on them. I don't know. I mean, I assume maybe they do, but in my brain they have no flashlight. They have no idea where they're going. They just know it's that way. Uh, I'm sure they got home just fine.

Oh yeah.

But I, I was like, I mean, Horses, I mean, they could see, right?

I've actually ridden home in the dark.

Really?

Oh yeah. Yeah, it's kind of fun.

They know exactly where they're going.

They know where they're going.

Yeah.

And they're way more sure-footed than you are.

Oh yeah, absolutely. Anyway, it was just a— it was a bizarre thing, and it's one of those kind of only in Texas types of things, you know. Uh, anyway, it was fun, fun story.

Yeah, I, I played at a church for a while that had 2 old guys that would still ride their horses to church every Sunday, and like, this was not that long ago.

You know, well, I mean, around here there's a lot of cowboy churches. There's a really great cowboy church up the road.

Oh yeah, they have like team ropings and stuff like pretty much every week.

Yeah. So I'm sure it's some— I'm sure it's a lot of fun.

Oh yeah. So, well, we've got, um, we gotta, uh, really, I think we, I think we can just talk about this article. We've got a couple different ones, but like this, this one I think is rather intriguing and it's the title of our show. Yeah. Because Kevin O'Leary made some comments. If you don't know who Kevin O'Leary is, he's star of Shark Tank. He's the guy that tells people their businesses are stupid or that they're a good idea, and then he tries to buy them off auction through the other sharks.

Right.

They kinda bid for it.

Right.

And he's, he's probably one of the more well-known characters on that show. I've never actually watched an episode if I, if I'm being honest.

I've watched, like, parts of episodes.

I've watched clips.

Yeah. I mean, because, like, Mark Cuban has always been super intriguing to me. Because, well, I mean, he's, you know, owns basketball franchise and like—

Is he on the Mavericks?

Yeah.

Okay.

And like all— so I, whenever, again, going back to the beginning of the show, Dallas fan as far as like sports goes. I, I never really got into basketball, but I lived in Dallas, uh, back in the early 2000s when the Mavs were really, really good. And, uh—

Is there more than one basketball team in—

No.

It's just the Mavericks.

Yeah.

San Antonio have more than one? No, just the Spurs.

Yep.

What am I thinking of?

I don't know. I mean, like, LA has— LA has 2, Clippers and the Lakers. So like, I mean, that's what I'm thinking of. Yeah. Uh, I mean, there, there's something like that. But anyway, so he's just this guy, like, shows up in like shorts and a t-shirt, and he's like, hey, what's up? I'm like a multi-millionaire, man. Like, like, he just kind of He's always been really intriguing to me. So like whenever I see stuff with him on Shark Tank, I'm like, okay, what is he gonna do? Like, I feel like he's just gonna kind of do something crazy. Uh-huh.

So anyway, he is an odd— do you know how he got his, like, his start?

Um, you know what, I do, and I, I couldn't tell you at the moment.

Internet radio.

That's what it was.

Yeah, yeah, he was like, he was like one of the first ones to do internet radio.

And he like, he's just a— he's, he's very eccentric, but more than that, he's like a just a cool dude.

Seems like. I mean, yeah, he— I mean, like, I've heard him— I've heard him say really smart and intelligent things, and I've heard him say really moronic things. Oh, I'm sure as well. But I think that's— I mean, like, when you're in the spotlight, that's just going to happen.

Sure.

But yeah, he's, he's an intriguing dude. And Kevin O'Leary is, is kind of an— I don't know how Kevin got his start.

I mean, I don't either.

He's just intelligent and wealthy. I know that.

But anyway, here's all that matters.

Yeah. So he is— and this is something I've been talking about And I don't know if I've talked about it a whole lot on the show. I think I've mentioned it a few times. But ever since COVID like, became a thing, one of the things I've been talking about is the commercial real estate market.

Yeah.

Because of everyone that went home and, and then people were having to adjust and, like, you know, well, we're gonna turn the power off. We're gonna— like, they were adjusting to what was happening. And then it was like, okay, so who's gonna come back?

Right.

And A lot of them have not come back still.

Right. And what's interesting about that is that so many of them, they see the value in going, oh, so I don't have to pay for all this overhead. But what's actually happening recently, I've, I've heard multiple people that are going, yeah, they're really starting to rumble. Like, they're, they're really starting to talk about, like, we may have to start going back to the office because they're finding out that Yes, they're not paying a lot of overhead, but sometimes you're also not getting your work done.

Yeah.

And there's something about that office environment that is healthy.

Yeah.

You know, the camaraderie that happens, the team aspect that happens that Zoom just can't quite do.

No.

You know?

Yeah.

So anyway—

It won't ever— that won't ever be the same.

No, it is very interesting though how long it's taken.

Uh-huh.

and if it will actually go back to what it was before.

Well, so here's, here's, here's some of the numbers.

Okay.

Um, and this is, this is a quote from O'Leary. He says, many of these office spaces are in subgrade markets, but even in cities like Boston, you find a lot of vacancies, up to 40% of buildings. Okay.

40%?

40%.

And these are like, how, how many rooms do you think are in these buildings? I mean, they've got to be massive, you know, like 1,000 room type places, the offices and stuff.

Yeah. What I— one of the ones I'd be interested to hear about is these shared workspaces. I'd be interested to hear how those places are doing.

Mm-hmm.

Um, because I would imagine they're down quite a bit as well.

Oh, yeah. I would think so. Yeah.

So, I mean, so when you've— when you've got buildings that are sitting at a 40% unoccupancy rate on average, man, that's—

that's gotta be costing you so much money on a monthly basis.

Yes.

Because most of these people don't own this stuff outright. You know, they're still paying— I guess it's a mortgage. What, what is it on real— on a commercial? Yeah.

You pay mortgage on it.

Mortgage. So they're still paying a mortgage on—

Yeah.

Yeah.

And all— and so what he is saying right now is here's the situation is we have a 40% unoccupancy rate. We have a lot of regional banks whose ledger is tied up with commercial real estate.

Okay?

And he's saying regional banks carry about 40% of their portfolio is in commercial real estate. Wow.

Yeah. So is this basically saying that some of these smaller regional banks are going to be— they're already hurting.

They're already hurting because they're These guys are defaulting, are starting to default on on the on the commercial end of stuff. Here's the real problem. Okay, what what a lot of people are saying, and he talks about this, and he did an interview, and I where did he do the interview so people can look it up? Ba ba ba ba ba. Kudlow. He went on Kudlow. Um, anyway, here's the rub: is when you have these small regional banks whose portfolios are tied up with 40% of commercial real estate, what typically would happen is the market would do a correction.

Mm-hmm. Right?

And you would either have to reappropriate that real estate to something else. The problem is, is it takes a lot of capital in order to move it over to— like, say you wanted to convert an office building into apartments or condos.

Okay.

Right? gonna have to demo, tear out, and then, and then rebuild. That takes a lot of money to do that.

Yep.

Um, and in some cases, you're gonna have to go through rezoning.

Oh yeah.

Or if you want to convert it to storage, in some cases, you're gonna have to go through a rezoning process.

Right.

Um, which can be expensive and time-consuming.

Yep.

And so like, so again, while these properties are not earning money, you're actually having to spend more money. Um, but like, say you want to unload it.

Right.

Okay, so you sell it to someone that has the idea to convert it to a condo or an apartment or a storage facility. They're going to have the same issue, right, where they're going to have to buy said property. Okay, then they're gonna have to do the build-out, then the build-out, and it's going to take time in order for that to happen. Yeah, well, most of these buildings are financed at like a 4% rate because they were bought more than, you know, 20 They've been on— they've been around for, you know, 30 years.

Sure.

So they're operating on a mortgage that's giving them a 4% rate, whereas now in order to finance them, you're looking at a 9% to 11% rate, which is a 3x increase on payments through interest.

Right.

Not to mention the price of real estate has gone up.

Up.

And, and so you are looking at properties that are not financially feasible. And so they're trapped.

Yeah. And, and at that point, like, so now we're— let's go back to what I said just a moment ago, where there may be some companies that are like, you know what, let's get the band back together. Like, let's, let's, let's bring them back. And they're going, not at the same place we were. No. Yeah, we can't afford it. Yeah. Because, because now these guys have had to make moves that have changed the trajectory of what they're actually doing, and they can't afford the same office anymore.

Right. And, and so if you have businesses that even want to move in, you're, you're talking about rents going through the roof.

Yeah.

And businesses potentially looking at it going, well, maybe we do need to keep people at home again.

Right?

We'll just operate virtually.

Have to.

I mean, they're gonna, they're going to adjust one way or the other. They're not, they're not gonna pay exorbitant amounts of money.

They can't.

Just to have a physical space.

They can't.

And well, yeah, they— and they just can't. And then these— and it's going to cause— and so here's, here's where our listeners need to be paying attention. If banks' portfolios are tied up with 40% commercial real estate, that other 60% is a large chunk residential real estate, right? Which means that when your regional bank that you have your loan through goes under because their commercial portfolio tanks them, right? What do you think is going to happen to your loan?

Well, it'll, it'll have to get sold.

It'll get sold.

It'll have to be. Yeah, that's the only option.

And, and, but what happens if it— if they don't? Like, what if they can't sell it? That's, that's, that's the thing is like, like everyone— like, I, I'm, I'm with you. Like, what's gonna happen? It's gonna get sold. Well, by who? And on what conditions and under what terms? And, and like, how is that going to pan out for the homeowner?

I will say this, like, every time I've bought a house, uh-huh, the loan gets sold at least once.

Sure.

And every time that happens, it's really no sweat off my back.

Sure.

Other than it's a little bit inconvenient because now I got to figure out, okay, where's the money going now? Where Am I— do I have the actual, you know, automatic payment set up, all that kind of stuff? But I don't know what the legalities around it, but I, I think that in order to have a loan sold like that, um, they have to keep your terms the same. So you as a, as a residential person aren't having to pay extra if your, if your loan gets sold.

Mhm.

Uh, the, the, the people buying the loan are paying a chunk for it.

Yeah.

But they're, they're making money off the interest at that point, so that it's fine with them to do that. But, uh, I, I, I, I just don't know. Like, I don't know how many large corporations there are out there that can bulk sell this stuff to.

That— I think, I think that's the problem I'm trying to point at, is you remember what happened in 2008?

Oh yeah.

Like, part of, part of what happened, the reason real estate prices crashed, is because all of a sudden all of these loans went for sale, right? And banks were not paying what they would normally pay. They were paying pennies on the dollar for them because these other guys had to unload them, right? So you potentially have a situation where homeowners' loans are going to get sold again for pennies on the dollar because these regional banks have to get out from underneath them.

Hmm.

Because insolvent, right? And all of a sudden, people who bought homes during COVID that paid gobs of money for them are, are gonna end up in situations where they're gonna be upside down on a loan because they're— they can't sell the house, right? Because prices have tanked, right? Because the commercial real estate market tanked, right? Which caused the residential price to tank, right? And now you've got a loan where you paid, you know, $400,000 for the house and now it's only worth $200,000, but you're still paying 4% to 6%.

Yeah.

That's what you got in?

Yeah.

Okay.

Well, yeah, I did well. I mean, I got 4.5% and I felt pretty good about that.

Right.

But there's a lot of people that are way more than that even.

Sure.

Now?

Yeah.

Right. No, now, goodness, it's up at over 6 now, right now, I believe. So let me ask this question because my brain immediately goes to like fix-it mode, right?

Sure.

So is the fix in your mind to—

to—

well, see, okay, you don't have tons of— maybe I'm wrong about this. From what I know, I don't think you have tons of like options whenever it comes to who owns your loan.

No.

So it's not like you can go to another bank and be like, hey, would you please buy my loan?

Right. But that won't make a difference.

Right. Because, well, the only thing that would make a difference— this is where my brain goes— is like, okay, you're talking about these smaller resident, like, regional types of banks, right? What if you move over to a large corporation bank, like Bank of America or Chase or whoever, right? Like a larger bank. If you move your personal checking over because you're afraid that, who knows, like this regional bank that I love, I've been with them forever, right? They're, they're mom-and-pop shop. I know that I'm gonna get to see Paul whenever I walk into the bank, you know?

Right.

I love that personal feel. But now, for one reason or the other, I've determined in my mind it's not safe to keep my money there. So I'm gonna move and I'm gonna move all my stuff over to, to a large bank. You can't just be like, hey, large bank, I'm moving over. Would you please buy my loan?

Mm-hmm.

It's not the way that works.

Right.

So—

Well, there's— but that's called refinancing.

Yeah. So then— so that's what I'm gonna get to. So now your option is go refinance your house at potentially—

9 to 11%.

9 to 11%.

Yeah.

And you're paying closing cost, which could be $2,000 to $4,000 probably just for the closing. And now you're paying a higher interest rate on something you were paying, you know, doubling the interest rate on now. So like, do you— that's the, that's the crazy part, right? Like, and, and look, I obviously— our goal right now is not to scare anybody. Like, that's not the That's not the goal. I guess the, the goal would be like, start asking some questions, right? Like, start, start being informed of where your loan's at, what's your— what, what's going on with it, all that, right?

I'm, I'm trying to see how, um, I was trying to look and see how old the average home loan is.

Oh, that's an interesting question. I, I mean, if I'm guessing the average, most of them are 3, 4 years. I'm guessing they're not very high. I mean, obviously, you got people that, that they've had their loan for 15 or 20 years.

Right.

A lot of people move often. Yeah.

So, no, they do. And I'm, I'm just curious. I mean, because even if they're, I mean, any, anything, anything older than 2, at this point.

Yeah.

Is going to have— and this is, this is something—

they're going to have lower interest rates.

They're going to have lower interest rates and they're not going to want to refinance it.

No, of course not. I would, I would never— I mean, we were so fortunate. I felt so good about 4.5%, uh, based on the fact that like a month later it was 5.5%, right? So, and now it's way past that. I would never want to refinance my house right now.

Yeah.

Ever.

Yeah. I mean, the only reason— there, there's 2 reasons you refinance, either because you can get a better interest rate, right? or you're looking to pull cash out, right? So I, I'm thinking—

And if they're, if they're 2 years or less, they're not wanting to pull cash out now. They can't.

But here's, here's again, here's the problem is if you, if the average, let's just say the average home loan in the US right now is 10 years old, which I, I think that's probably a fair guess. Okay, sure. Um, I could be way off, but I'm, I'm just, I'm just gonna go with that guess.

Okay.

Let's, let's just assume that that's true. If that's true and people get in a hard way, okay, they're going to have to refinance in order to access the equity and the cash that they might need to survive. So they might get put into a position where they have to get stuck with a crap interest rate.

Wow.

Just to survive.

Oh.

In order to get cash out.

Ugh.

So, I mean, because, because here, here is the, here is a number I do know. is that 70% of Americans don't have access to $1,000.

Oh, right.

Right?

Right.

So, like, if, if the commercial market collapses, it's going to cause— what are businesses going to do? They're going to start with firing people. They're going to have a round of layoffs in order to— because they're going to have real estate that they can't unload.

Right.

And so they're going to have to pay for that. And in order to make, you know, the prices are going to go up. and on rents and all this kinda stuff. When that starts happening, they're gonna do rounds of layoffs. And so people are gonna lose their jobs. And if, if the average home loan, again, I'm, I'm guessing—

Well, I was looking too. It's hard to find.

It's hard to find. They start— you start getting, like, the age of people when they buy houses.

Yeah. Exactly.

It's like a stupid statistic. No one cares.

Nobody cares about that.

But, but, yeah. So, like, you're, you're— that, that's going to be a compounding problem.

Right.

And so when 70% of people can't access $1,000, the only thing that they have access to is the equity in their property.

Right.

If they even own that property.

Right.

So they'll panic.

Oh, yeah.

And, and they'll pay that 9 and, you know, 9 to 11% in order just to get their cash. And they'll refinance out to another 30-year loan.

So, I mean, it's a, it's a really crummy option.

It's a crummy, crummy option. Like, but, like, I'm, I'm thinking about from— so, like, we are on— we, so we're, we're getting close to being halfway done paying our house off.

Right.

So, because we're on a 15-year note, right? Um, and I think we're on schedule to pay it off in 10 if we stay like we are right now.

Cool.

Um, so, which I think that means we've got like 7 years left if we do that.

Perfect.

Um, because we refinanced, right?

Right. Um, like 3 years ago. Yeah, math checks out so far.

It's, it's somewhere in there like that. Um, which, by the way, there's no penalty to paying your house off early.

No.

Um, you can— well, you have to ask. I mean, sometimes—

Most of the time it's not.

Most of the time it's not.

Right.

Um, I forget where I was going with this.

I don't know, something about how fast you were going to pay your house off and how good that was going to be for you.

Oh, that's what it was. That's what it was. So I'm, I'm, I'm, I'm 3 years into a 15-year note that I should have paid off in 10. So 7 years, 7 years I should be done. But like, let's say I got in on— in hard times, right?

Pulled money out. You have to.

I can, I can access quite a bit of cash through the equity in my home.

Sure.

Now, refinancing is not the only way to do that.

No.

There are other ways.

Yes.

They're not necessarily the best ways to do that.

Right.

But you can do it without refinancing.

Right.

Let's say I had to refinance.

Okay.

I'm probably going to stick myself in a 30-year loan. Well, sure, because if I'm, if I'm strapped, yeah, I want my payments to be as low as possible. So I'm gonna, I'm gonna come in and I'm probably gonna qualify for like a 9% loan because I've got pretty good credit.

It's laughable, right? I got really good credit.

9%.

9%. Here you go. Congratulations.

Red hot poker in my kenny popo.

No doubt.

Um, anyway, it's like That's really— other than having the cash, there's no upside. Like, my payments probably aren't going to change all that much.

No, but well, except the fact that you got to keep paying them for a whole lot longer.

A whole lot longer. Yeah, I went from being close to done in 7 years to not being done for another 30. What the hell?

It's awful. Like, that's not okay.

And that's— but I mean, like, that's, that's the direction we're heading.

That's where you're at.

So it's It's not looking pretty out there, folks.

Right. No. So, well, I— it'll be real interesting. I mean, these guys like Kevin O'Leary, like, they, they—

He's salivating over this, man.

Oh yeah. I mean, they, they're, they're hoping stuff like this happens for sure, uh, because they—

Crashes create opportunity.

They do. And most people freak out, and, and that's when people buy that are smart.

Exactly.

So it's just a matter of figuring out the best way to do that. So I don't know. Yeah.

But I mean, just thinking through, here's what I would tell people is pay attention to what's going on. Set yourself up to be as prepared as possible to where not only can you survive this, but that you can actually be the kind of person that can come out looking good on the back end.

Yeah.

Because it's when you're— when, you know, there's, um, I think it's Jamie Dimon who's like the, the CEO of Chase, uh, JP Morgan Chase. He has a philosophy called the, the Fortress Strategy.

Okay.

You know what it is?

I don't.

Mountains of cash. Yeah, it's called mountains of cash because mountains of cash can survive anything.

Yeah, I mean, it's, it's liquidity It's availability. Like, it's— I mean, I don't know.

When, when people have to sell their properties for pennies on the dollar, it's good to have the pennies.

It is. It is.

So, but like, we, we know 70% don't.

No.

And it's probably less than 5% that have access to the kind of cash that can actually benefit from a crash.

Yeah. And, and I think the problem with all of that, especially where we're at right now, in the state of the union, so to speak. And not only that, just the world, is that the inflation has risen to such a rate where we can't just stockpile cash. I got to have it to drive my vehicle. I got to have it to pay my electric bill. I got to have it to buy a gallon of milk or a carton of eggs.

Yeah.

I've got to be able to feed my family. I gotta be able to drive to work. Like, I, I just don't have extra.

Right.

And when you don't have extra because inflation has risen to a point where your, your yearly raises, if you're even getting those, they can't keep up.

Yeah.

You know? And so I, I feel for, for, well, for all of us as we're trying to, to navigate the crazy waters of, because unfortunately you gotta have money to live and What, you know, I, I, I wonder, like, this, it just makes me wonder, at what point are we gonna see fewer and fewer people buying homes? And are we gonna—

We're already seeing it.

I, I know we're already seeing it, but how long is it gonna be before it's like so noticeable that people go, oh, you know?

The, the, the one redeeming thing that I think we have going for us right now is I think in a very short amount of time we're going to have a surplus of inventory.

Well, yeah, I think that's going to be the only option.

It's, it's going to screw builders.

Well, of course, um, especially those that are out here building thousands and thousands at a time. Yeah, you know.

Yeah. So, but like, I, I do think in, in within— and like O'Leary says, like, we're probably not going to see the effects of this for another 36 months. I think he's probably right about that. And I think, I think, you know, you know, come 2025, we're, we're gonna see a surplus in inventory like we've never seen before because building got ramped up like crazy.

Yeah. During COVID Well, yeah.

Um, and they, a lot of them were just waiting for material price to go down. And as soon as it did, man, they just hit the ground running.

Yep.

Um, and have been build— and like mostly apartments.

Mm-hmm.

A lot of apartment construction has been going on.

Which they're, they're gonna come out looking like geniuses through this whole thing.

The apartment builders?

Yeah.

Probably.

Because they're gonna be the ones that are benefiting from people having to get out of their home and like, look, I can't buy another home right now, so I'm just gonna live in an apartment.

Well, and like, what's happening right now is apartment rental rates are about the same.

They're so high.

As renting a home.

Yeah. But I don't have the extra concern about what if a water heater breaks or what if, you know, what happens. Sure.

I mean, it has its benefits. Um, but I, you know, I, they may come looking at Rosie. I, you, you may be 100% right. I don't know. I'm just saying, I know, you know, I, I just know that there's going to be a surplus in inventory.

Yeah.

Like, just numbers-wise, there's going to be.

Well, when, when, when rates do what they're doing and prices do what they're doing, inflation continues to go up, jobs are what they are. And if we start seeing some of this stuff happen where these guys that own businesses and stuff, they're going to have to start laying people off, if that winds up— all of the cards align to go, okay, we may not see a recession like we had in the Depression type of thing going on, and we may not see you know, a crash like we did in 2008 again. We might, but, but I don't know that we will. But it's gonna, it's gonna hurt, and it's gonna be very, very felt. And there's gonna be a lot— I think what's gonna happen is if we're not prepared, if, if there's people not listening

to our show today, I think there's gonna be a lot of people that wind up going, I never saw this coming.

I, I, I'll, I'll make a bold prediction for the show.

Alright.

I actually think it could be worse than 2008.

Okay.

Because at least in 2008, we know what happened. It was crap loans.

Right.

Being sold to unqualified buyers.

They were, they were giving people $500,000 loans that couldn't afford a $200,000 loan. We—

that's not happening now.

No. For sure.

That's not happening now. Like, we have qualified buyers.

Right.

And behind these loans, what's happening is the, the, the— I mean, whether or not you think the— what the government did during COVID or not was a good or a bad thing is insignificant. they dilly-dallied in the market in a way that is unrecoverable at this point to go back to normal. Normal's not coming back.

Yeah. I don't know. I mean, we— I don't know about you, but like every once in a while, I live in Montgomery County. Like, that's where we live. Super conservative. Probably of the counties in Texas, the most conservative.

It is the most conservative county in Texas.

Just keep that in mind. But I see stuff all the time. It's like, remember what gas price was on April, you know, April 1st, 2020 or whatever? It's like, yeah, it was $1.35.

Yeah.

And it's like, okay, now we're looking at prices that are $2 more than that, you know, 3 times more. And people in California are like, $3.50 for gas? I wish. Um, yeah, because my parents were just there. It's almost $6 a gallon.

I don't doubt it.

And, uh, And so it's just, yeah, it's crazy. And so I think that whenever we see that, I just don't know. It's been there for so long. I just don't know, even if a new president comes in, if some of these things are going to go down like they did.

I don't think they will.

I don't think they can. So it'll be interesting to see what happens with this new election. that comes up.

But, yeah, even still, like, I mean, I think, I think some things are gonna change for sure.

They have. They will. Some things will change.

But I don't think it's going to make people go back to a brick-and-mortar office building.

No.

And, like, and that's, that's what's driving this. So now, I mean, like, I mean, maybe you can pass some legislation that would change. I don't know. But I, I can't imagine someone going, you know what? I'm tired of being at home.

Yeah.

I wanna go back to the office. Yeah.

No. Everybody— look, this— that's the thing is, like, Almost every— there are those crazy extreme situations where you have the most extroverted person in the world is like, I hate being at home.

Right.

Right. But even then, you know, they've got a spouse or some kids, they're going, man, Daddy, I sure do really like you being around.

Yeah.

You know, and so that winds up going, okay, I can probably do this.

Well, and they've, they've filled their, their social calendar with other things because everything else is open back up.

Right?

They can go to the bar, they can go to church, they can, they can go to the skating rink, they can go to the bowling alley.

And they can work from those places too.

Yes.

You know, and, and oh, by the way, they bought that house that had the office in it.

Yep.

And so they're happy because now, now I got all my stuff here.

Yeah.

I got my own dedicated space. And we got a, we got a friend who was here at your birthday party last night, Jared. He's been on our show, uh, before multiple times. And, and Like, he built a new, uh, barn at his house, and in there he built his own—

It's the work bunker.

Yeah, he's got his own— It's pretty sweet. It's pretty sweet. And he's like, I love it out here.

Yeah.

And so, like, if he had to wind up going back to, to an office, I guarantee he'd be like, what in the world? Like, I built this whole place. Like, it's what I wanted. I'm happy here. Like, why?

I mean, can you imagine the proposition from your workplace? Like, listen, Jared, What we'd like to do is offer you less freedom.

Right.

Okay. Less time with your family. And but we don't wanna change your pay.

Right.

And, and we're probably gonna, like, take away some benefits because we've been, we've been paying for the internet at your home.

Yeah.

We've been, you know, we provided that computer there for you.

Right.

We're not gonna do that anymore.

No.

So just—

Because you'll just use the one at the office.

Just come on back to the office.

Right.

It's like, No.

Spend, spend your gas dollars, spend your energy.

Yeah.

Spend your time.

Like, like, and like, businesses aren't stupid.

No.

Like, they know that they don't have a value proposition on this.

No.

Like, it's, it's not. Now, I mean, like, you, you know, everyone cheered when Elon Musk was like, hey, all Twitter employees, come back to the office.

Right.

And then they all moaned and cried and were like, haha, you know? But like, come on.

Right.

I mean, now I also think it was— I mean, like, he also pointed out, it's like, look, we, we can operate this company with, like, a third of the employees.

And he did.

And so it's like, if you wanna keep your job, come to the office.

Right.

Now that, that is a value proposition.

Yeah.

That's worth taking a peek at.

It is.

Like, oh, I'll lose my job.

Right. That's a different story. That's different than taking a pay cut of internet prices.

Yeah. Yeah. So anyway, I— this is— it's an interesting topic, man. We've had a lot of people join in on this one, so like, I, I hopefully it was interesting, um, and, and helpful and just, you know, made you aware of some stuff that was going on in the market. Um, you got anything else?

No, I, I, uh, I, again, I, I'm— we're not experts in any of this. All we're doing is, is giving you information, right? Yeah. So, uh, we'll link up the article in the, in the show notes so you can go read it for yourself if you like. Um, but yeah, I think that's about it. Let's wrap it up. Uh, so yeah, thanks for everybody, uh, tuning in. And, uh, if you're live, thanks for joining us live. Uh, go check out our YouTube channel.

Yeah.

Like, we're actually a lot more active over there recently. And, uh, if you haven't liked and subscribed to our Facebook and, uh, go leave us a rating or review on Apple Podcasts Fantastic. Thanks for everybody listening. We hope you have a great week. Until next time, we'll see you later. See ya. I had a weird, like the entire time I had a static in my ears. The entire time. I knew that it wasn't happening on your end because you would have said something. Yeah. And I don't know if it's because of how my, how it was plugged in.

Could have just been a loose connection.