Right now, let's talk about money, because I need to learn a little bit more about how the money with Joel Larsgard, friend, I haven't talked to you in such a long time.
How you been, Joel?
It's been too long.
Bo I miss you. You complete me.
I feel the same brothers with you. I know.
I have been thinking about the economic uncertainty for quite some time, and I wonder what's going to happen to my four one K my pension. And there are people out there with three fifty sevens all sorts of retirement accounts.
In me, I'm just speaking for me.
I was moving stuff around because I was concerned about the stock volatility. We see what has happened in the past couple of months. We've gone from about forty five thousand Dow Jones down to forty one thousand.
I move stocks to bonds. Am I alone in the concern? And also my.
Response, no, no, you're not at all.
And the Wall Street Journal had an article this week is specifically highlighting people who are kind of changing up their portfolio similar to what you're doing, in light of kind of the economic uncertainty and the volatility in the stock market. And it's interesting I think people are saying, I feel like I'm a little too exposed to stocks in particular, and so they're opting to, you know, instead, sell a little bit of their stockholdings, migrate a little
bit towards gold and cash. And it just takes me back though to two thousand and eight when I first started working in radio, and I remember talking to a co worker who was and I was like, literally just in the beginning days of investing. I think it was like my second year on the job, and one of my cocores was saying, oh my gosh, the stock market is in free fall, Like what what do I do? And I basically my advice to him was stay the course, Like if you sell, how will you know when to
buy back. Think even of the recent twenty twenty COVID downturn of the stock market, there were predictions, dismal predictions from really smart people that the stock market was going to keep cratering. Think about how long it lasted ultimately and how quick the recovery was. I'm worried that friend that I talked to back in the day, he did make significant changes, and it's just once you start selling, once you start tinkering just because the emotions are running hot.
It's really hard to know when you go back in and take on more stock exposure, if you ever do. And I think for most people making those changes, it's more emotion than it is science.
And I don't think that's a smart response.
You make a great point.
Emotion is inextricably linked to our money. And when you mentioned two thousand and eight, that strikes a chord with me, because in two thousand and eight was the beginning, obviously of the Great Recession. I remember I had just purchased a townhouse in two thousand and six for three hundred and forty thousand.
By two thousand and.
Eight it was worth like one hundred and twelve thousand, and I was going through foreclosure.
It was the worst economic time of my life.
I say all that to say, for a lot of people, this is a time in which they don't want to go through what they went through in two thousand and eight. I don't have the time to start over eighty more. I'm too old in that regard. What other types of considerations do you think people are making right about now, beyond just this particular moment.
I think it's important to note two things here.
One, you know, we've experienced what's called a correction in the stock market, so where the S and P is down ten percent essentially from its height, and there was already a lot of talk about over valued stocks, and so I think there was room for correction anyway. And then when you talk about the tariffs, the kind of whiplash the tariffs that were and then that weren't and then that are going to be, that is causing a lot of uncertainty for businesses, and so it makes sense
that we've seen a ten percent correction in stocks. Where do things go from here? I don't have a crystal ball. I don't know, but it doesn't feel like from everything else that we're seeing when it comes to economic readings, unemployment, kind of where things stand, consumer spending, that we're headed for some sort of dramatic recession or anything like that.
We could be right, it's hard to predict.
I think the most important thing for people who are out there investing right now and they're close to retirement, you have to have a portfolio construction that allows you to sleep at night. And if you are, if you're freaking out over a ten percent drop in stocks, well then you're probably too stock heavy. If you are, if you're worried, right, if you're not sleeping a night, if you're checking your portfolio constantly, well, one piece of advice I have for folks is to check your portfolio less.
And that sounds maybe like sticking your head in the sand, but I think it's I think it's the opposite. I think when you're constantly paying attention, when you're vigilant to every move you're over, you're more likely to freak out over the little machinations that really have very little outcome
on your ultimate ability to live a good life. So, if you have stayed the course and you've been a good investor for a long time, just make sure that your portfolio is aligned with your ability to sleep and and so for some people that that might mean think about in twenty twenty, think back what you did five years ago. If you were making significant changes, then it means, yeah,
your portfolio wasn't constructed for potential significant losses. You need to have a balance in your portfolio that allows you to have some more diversification so that you're not over indexed towards stocks, so that you're freaking out when the stock market does see declined, because that's the great I think people have gotten used to, except for with the exception of that twenty twenty COVID dip in twenty twenty two, the stock market essentially being kind of like a high
old savings account that.
Just returns a lot more.
And that feels good, right, It feels good to see your networth shoot up.
But the truth is correction that the stock market are normal.
Something like this is like completely normal in a given year, And so I do think that that the handwringing is probably overwrought.
You said the R word as in recession. There have been more and more discussions about whether we are on the path to a recession or not. Definitionally, you already know this recession means two quarters of consecutive quarters of negative GDP growth. I'm asking you, Joel Larsgard, Obviously, if we're in a recession, that means we've already been sliding down that hill for a while to get those two consecutive quarters of negative growth. So there are indicators prior
to that. What are you looking for to say, hey, we are on our path to something economically disastrous.
Yeah, I think right now, all eyes are on policy coming out of Washington, DC. And it's interesting. One economist was recently quoted. He said something like this could be the only recession that was completely avoidable and essential, like it could have been changed at any moment in time. And it feels like tariff policy and some of the economic just decisions coming out of the White House, those are the things that could kind of push us towards
a recession that wasn't likely in the first place. Man, it makes me think just a couple of years ago, though I think this is probably a year and a half ago, Bloomberg had an article and they said all signs point one hundred percent likelihood of recession coming. They literally said, one hundred percent. Our indicators are lighting red, a recession is on the way. And that recession didn't materialize. So there's another saying that economists have predicted nine out
of the last four recessions. There's always talk of recession, right, It's like this is something that's what else do economists do except for talk about the recession that's coming that doesn't end up materializing. There's always reason to be fearful, But what we don't think about typically is the hope and how resilient companies are even in the face of uncertainty and new policy coming out of Washington, d C. These are new hurdles to jump, but the American economy
is nothing if not resilient. And I think especially especially for younger listeners out there who are tuning in and they're.
Like, I'm kind of worried.
Well, the cool thing about a drop in stock prices is that you're able to buy stocks on sale. I'm a big fan of dollar cost averaging, So if you're in your twenties, thirties, forties, you should just just keep buying, as my friend Nick says, and just kind of every two weeks with your paycheck just keep scooping up more and more. And if prices go down, that shouldn't worry you. That should excite you that you're buying on sale.
That is great, great advice. And I guess right now is Joel Larsgard.
He's the host of How to Money, which is airing on here on CAFI Sundays from twelve to two pm. Joel, the supposed possible connection between federal land and the housing market. Is there a way in which we could use federal land to make more housing type landscape available for just housing in general. Is there a way that we can combine the two.
Yeah, there is, And there's been this proposal from the Interior Department and HUD to basically say, hey, we as the federal government, we have hundreds of millions of acres of federal land and we're kind of sitting on it, and some of it really could be built on to ease the housing crisis. And if you've been following what's going on with kind of the lack of construction, of the lack of new units being built, that has created
a real problem in this country of affordability. Yeah, it's higher interest rates, but it's also just a lack of supply, and some estimates say that we're three or four million home shy of what we need to kind of fix the problem. And so this is one of the things I've kind of been harsh on the Trump administration when it comes to some of their economic policies. This is one of those things, though, that I can get behind to say, hey, we're going to open up some of
these some of these acres of federal land. We're going to streamline the process and make it easier for affordable units to be built to be built, and I think that could over time. This is one of those things you don't write the ship in mere weeks or months. This is going to take time because the housing market, it doesn't turn on a dime. But I think it's just great news, and I think it's kind of where we need to be headed, at least at least it's part of the solution.
Just to be clear, it's federal land, but would it be loaned or made available to private developers or with the federal government still be in charge of creating these housing developments or units.
They've talked about like transferring or leasing the land to public housing authorities, different nonprofits and local governments. So it's it's not going to be the federal government itself building these units. They're going to find partners who are kind of closer to the ground, who are who they're going to vet in order to build these units. Interesting thing too, is like how close are these units to the most expensive places?
Where?
Where are you know which lands are going to get built on? And it seems like some of this land is going to be more rural right in nature, So I guess in places like California in southern California. That might not be a you might not see a relief in home prices really soon because of this, but it does make me think like they're if you've been following kind of what's happening in Austin. Austin has rolled back the red tape when it comes to the how much, you know, how much it takes to get done, to
get some things built. They've basically made it easier to build multi family units on single family residential lots that were formally formally sowed for single family and it's been amazing.
Austin's been a boom town.
I was just their last week and they're putting up apartments right and left, and already rents have declined twenty two percent from like what I'm calling peak Austin just over a year ago.
So this boom and building when we really do.
Kind of cut back and roll back some of this red tape, when we increase supply, it's amazing how incredibly expensive Austin was becoming. But when we just make it easier for people to build units, which is far from the case here in the state of California. When we make it easier for people to build for builders to
get in there. They you know, it might be the person in the single family home next door might say, I don't really want a quadplex next door to me, because that's that's the NIMBI movement, right not in my backyard. I don't want that thing next door. But ultimately it's it's best for all of us, and it might not be as productionary to your home price, but it's going to be better for young people who are trying to their first home.
Let's go back to what we were talking about last segment, about this idea of an approaching recession. How much of the pie is the housing market in the assessment in the health of our economy.
Yeah, I mean the housing market matters a lot. And what happens with the housing market is also anybody's guess. It's because we have that lack of supply just overall, but then a lack of people putting their homes on the market because when you have a two point eight to seventy five percent mortgage, even if you want to move, you don't because you don't want to buy something else with a seven percent rate. And so the real estate market's kind of been on lockdown in some ways, and
it's kind of kept prices high. But at some point people are going to get used to these seven percent rates because I think the I think the three percent rates were essentially a vanishing thing, Like I don't think we're going back to that era. A lot of real estate agents have been telling people buy the house, date the rate, that kind of thing, and it's like, well.
I don't know.
You don't want to land on or bank on the fact that you're going to be able to refinance next year at a five percent rate, because that hasn't materialized, And I'm worried about people planning in that way and not being able to and being stuck with a higher than the mortgage than they can actually afford.
So be careful on that front.
But yeah, what happens with the housing market, I could see a slide in prices, especially the longer we're in this era of seven percent rates, the stickier that is. At some point people just say, I have to move, I've got to go somewhere. More people are listing their homes and we could see I think the predictions for housing price increases this year are essentially non existent. And if you think just a few years ago, when how home prices were rising like wildfire like that era is.
Over last question, Joel, and I think you kind of tipped off where I was going with this. I wonder, given that interest rates for real estate purchasing real estate will probably never go back to the three percent as you see, I thought it was artificially deflated because of COVID and other issues.
Those days are gone.
When I bought my first place back in I don't know, two thousand and three was like a seven percent interest rate, so that.
Is normal for me.
But having said that, have we also changed in the sense that the idea of the American dream and using homes purchase of real estate as a way of generating wealth in a generational sense?
Is that time also gone?
I kind of hope so.
And it's not that I'm against people having value creation in their home. It's kind of a force method of savings. And you know, when you think about the average Americans networth, the substantial amount of it is tied up if they're a homeowner in the value of that home.
Especially if they bought a decade ago.
But I think, especially now, when you look at the discrepancy between what you're going to pay taking out a mortgage on that new house versus the rent you would pay for something similar. The GAP's never been wider. And so I get the desire to own your own place. And I don't want to tell people who want to do that that it's a bad idea, because I don't think it's a bad idea. I just think you have
to be aware. You've been taught for so long, we've kind of been brainwashed that buying the home that's the next step to adulthood, that's the next step to wealth building. And I think for a lot of people, renting can be a great step to wealth building because you're really minimizing your monthly outflow and renting for longer can make a whole lot of sense, especially if it allows you to invest more of those dollars. Think about what you would have spent on the mortgage. Just price it out.
I was looking at a house in this price range at this interest rate, what would I be working over? And think about what you're working over in rent right now. See what the gap is. If you can invest that money, you're going to come out ahead over time. And so
I do think, yeah, renting is kind of undervalued. It's and I hope that kind of the discussion around renting versus home buying is changing, because I think it's not only possible, but it might be easier to build wealth as a renter these days.
Real quickly, we didn't have time to get to it, but we also had the opportunity to possibly talk about how Harvard had just announced that tuition will be free for families making less than two hundred thousand dollars a year. I only bring that up because that's usually a consideration for families usually taking out a second mortgage or pulling out equity of their house to send.
People to college. What about that? Then you lose that option as a renter, don't you.
Well that's yeah, you lose that.
But you got to then funnel some of those money, those investment dollars into like a five to twenty nine.
Account plan ahead for your kids' school.
But the thing is, I think five to twenty nine accounts can be great, but I think they also might be They might be over considered too if you're not saving enough and investing enough for your own retirement. The five twenty nine is a great plan. It's gotten more flexible. Just don't prioritize that above your own saving for your own future because they're scholarships available. And look at what Harvard just did, and look what other schools are doing.
It's actually the sticker price of college has gone up, the actual price people are paying has gone down. That's something that hasn't been talked about very much. There's kind of data about the post discount rate, and so it's actually getting less expensive to go to college these days. So the first time in a long time. Part of that's the COVID factor, right, that people are just not going to college in the same numbers as they were, and so it is putting downward price pressure on a
higher education. I think that's a good thing, and I think it's good that people these colleges are prioritizing free education for people who don't make ridiculous sums of money.
How to Money with Joel Larsguard airs every Sunday from twelve to two pm. You can find Joel Larsguard at how to Money Joel. Joel has been way too long. Hopefully we get to do it again sometime soon.
For sure, let's do it mo