Around the Horn – Housing Prices, Vatican Investments, Retail Investing Boom [PODCAST]

Around the Horn - CMM 5-2021

[00:00:00]Andy Flattery: [00:00:00] Great. Welcome back to the Catholic money mastermind Pat podcast. This is the show where we explore the intersection of our faith and finances. You can learn more about our organization and find show notes for this episode at catholicfinancialplanners.com. Please note that nothing in this episode should be construed as investment tax or legal advice.

I'm here today with Tyler Hackenberg and Michael Acosta. My name is Andy flattery. How are you guys doing?

Tyler Hackenberg: [00:00:27] I'm doing great

Michael Acosta: [00:00:29] I'm doing great as well. Thank you.

Andy Flattery: [00:00:30] Good to be here with you guys. And we're going to do another around the horn episode. , Michael , for starters, what is your topic for today?

Michael Acosta: [00:00:38] So the topic that I want to discuss and have you guys chime in on is really around home purchase for, for really new home buyers, millennials Henry's, whatever. Whatever title you want to give them is now the right time as the market is the housing market too hot. Does it make sense to, to use liquidity, to purchase a home [00:01:00] right now when you know, prices are at their peak or percent peak versus holding out and continuing to rent?

Andy Flattery: [00:01:06] Cool. And that sounds great, Michael, and then Tyler, what do you have on the agenda?

Tyler Hackenberg: [00:01:10] A article about the Vatican investing in a morning after pill producer. So it really touches with. Where does our investments meet with the Catholic faith and what we can do about it.

Andy Flattery: [00:01:26] I love it. I love it. I thought I would bring to the table just this news out of Schwab that There was 3.2 million retail accounts opened in Q1, which was over 50% higher than all of last year. So I thought we could maybe talk about just the retail investment. Boom. Cool. Well, that sounds like a great agenda, Michael.

I liked, where you're going with homeowner ownership. Why don't you kick it off and kind of tell us your thoughts about that topic.

Michael Acosta: [00:01:53] Yeah, no, of course. And one thing I want to point out is that going be between the three of us, we make up different areas of the U S so I think it'll be [00:02:00] great to share some of the data that we might have accessible or that you guys might be able to provide. So, you know, I'm located on Charlotte, North Carolina in the Southeast of the U S and when I go back and just look at the housing market in general.

So since 2015, I've been blessed to have the opportunity to buy and sell. Three different properties. As far as from when I was single to getting married, to starting a family and, you know, purchased my first property in 2015, which was, you know, I feel like right in the middle of the housing market in the Southeast, starting to climb up the mountain and starting to accelerate, we then sold in 2018, which, which my wife and I thought was, you know, the peak of the housing market.

So we were able to take advantage of the sellers market. Selling our home in like less than 24 hours of being on the market turnaround and investing in a new build at a reasonable price. And then now fast forward two and a half, three years. [00:03:00] And we're seeing a new peak in the housing market, at least in the Southeast where there's less than 30 days worth of inventory.

And in speaking with some of my strategic partners who are in the real estate market, Or, or, you know, more of your specialists. It's, it's what they're seeing is something that hasn't really occurred, at least in their, their time in the you know, within the real estate industry as a whole to where, you know, it's a sellers market, people are getting multiple offers over asking price.

Less than 30 days inventory on the market, plus factoring in the pandemic with limited supplies or imports or material for new construction, which is causing new construction developments to reduce the number of spec homes or inventory based homes that they have from a new build standpoint and lots, no longer being first come first serve.

And many of these newer developments and moving towards a lottery based style setup. So it's like the housing market [00:04:00] around here has completely shifted and it's the most aggressive that are seen. And so when working with a lot of my younger clients who want to purchase homes, who were tired of renting, not building any equity and the main focus in our engagements has been, you know, how do I help you become a world-class saver?

How do I help you be efficient with saving and building liquidity for when you're ready to make your first home purchase or, or other take advantage of other life events or milestones? Well, we're at a time where it's like, okay, well, does it make sense to buy now? We're we're at all time highs or does it make sense to sit on your liquidity, allow things to slow down and then take advantage of maybe a pullback in the housing market?

The thing that we don't know is the timing behind you, right? It's just like the stock market. I don't, I mean, I personally don't feel like anyone could ever really time the market perfectly. And so it's just, where do we fall in, in the housing cycle? And how do we be most efficient with it?

Andy Flattery: [00:04:53] Yeah, I think it's a great point. And I, one of the things that I think about is maybe, you know, this is kind of a [00:05:00] cheat, but you could just take a financial planning perspective. So if you think about. You know, like a very long-term goal of home ownership and you know, especially if it's like, you're the type of person that is like implanted in a community and like has a pretty good understanding as to what you know, your future might look like to me, it's still probably a no brainer to, to buy and own a home with a, with a nice down payment.

And you have you have some nice equity in it with the understanding of. The idea that if you have a 15 year mortgage or a 30 year mortgage, well guess what, if you think you're going to, you're going to be in, like, let's say it's like, you're a community that you're a pillar of for decades. You pay down the loan and you own the house free and clear, and that's a pretty good deal, regardless of what happens to the value of your property.

Now, the problem that I see is that a lot of my kind of people in my world, my network, younger families, I mean, they're moving every three to five [00:06:00] years, just like you pointed out Michael. And and they're, it's kind of a gamble. It's easy to think that this could keep running for another couple of years and maybe it will.

But but it truly is a gamble if you're kind of banking on that happen. If you're the type of younger family, which a lot of us are that move around a lot. Yeah.

Michael Acosta: [00:06:15] Right. You know, rightfully so. And when it's a hotter market, There are two things that are, in my opinion, working in their favor, one interest rates are at all time low. So they're able to get it larger loan and maybe buy into you know, a area of town that they otherwise wouldn't have been able to.

Right. But at the same time, it's somewhat offset because homes are insulated you know, over the course of the last two years, at least in the Charlotte area, you know, they've grown by about 38% since 2018. As far as the average cost of the average home going from about 235 235,000 to about 335, roughly give or take in that range from what I've been seeing in some of the [00:07:00] research I've been doing.

So you have these homes that are overpriced. You have very low interest rates, which allows you to leverage yourself more. And then statistically, like you mentioned, families live in probably, you know, 10 plus different homes over the course of their lifetime. And especially in the early years, we're moving every two to five years based on families growing, starting out with a starter home that maybe doesn't have nearly as much square footage of the yard that we want.

And then in a matter of two to three years, moving into something bigger with more space, maybe the yard that we dreamed of. So. With, with that being the case. It's how do we balance all of that without one over leveraging ourselves and becoming home for, and at the surface level, I find it difficult to balance that.

But from your perspective of, you know, if we take a comprehensive planning approach and we're doing all the right things, it's a no-brainer, especially if you're planning on living in the property for at least three, three plus years, right. That's kind of that [00:08:00] breakeven point is being at that at three years, minimum versus renting and continuing to sock away and build liquidity and maybe buying something once the market pulls back.

Andy Flattery: [00:08:09] Well

Tyler Hackenberg: [00:08:09] I'll actually jump in. So I live in the Northeast. Just North of Philadelphia in the suburbs and the housing market here is just crazy. And actually we actually, my wife and I bought a house just recently. We close on the 23rd and we're selling our house. We did one week or one weekend of showings and had seven offers.

So. Thank you. Yeah. And the house that we bought was a private purchase. So we didn't have to go through like the bidding Wars and stuff like that. So really one of the things to consider is how long do you want to potentially lose out on houses and be emotionally prepared for that? That's definitely something that goes along with this conversation.

It's a financial [00:09:00] yes, but there's also some emotional stuff as well. So to be prepared for that as well.

Andy Flattery: [00:09:08] It kind of goes back to like the idea of thinking about your house as an investment or thinking about it as a consumption item. I know this is like a kind of a gray area in, in financial planning where, you know, it's a little bit of both and some people that really understand the taxes, you know, that they'll move every two out of every five years to kind of trade off and take advantage of that tax tax exclusion.

But then a lot of people just, you know, they, they kind of. I think their house is more of a consumption item and it's a place you live and it's nice to own the, you know, the, the, the home with the yard, like you said. So I dunno, it's, I I'm, we're seeing the same thing here in Kansas city. Th the house I bought five years ago has, has now doubled in value according to Zillow.

I've had a couple of clients and kind of savvy friends that are, what they're doing is they're selling and they're using.

Using the time to like maybe you [00:10:00] rent for a year or maybe you take an extended vacation and travel for a little bit trying to figure out what the next, the next move is. Or maybe you move from one market to the next. I just had a friend move from Kansas city to rural Iowa. And so that might be a way, a way to think about how you can, how you can deal with the craziness out there right now.

Michael Acosta: [00:10:19] Yeah, no, those are all valid points and things to consider. And I think at the end of the day, from a planning perspective, you have to do your due diligence and ask yourself if you're an individual who's looking to purchase a home. How long am I planning on living there? Right. Because there is an