Real Estate People
After I left the Marine Corps in 2010, I became a ‘financial advisor’ - a modern, perhaps more sophisticated-sounding phrase for stock broker - with BofA-Merrill Lynch. A rookie financial advisor is just like a rookie real estate agent: he/she is hustling and struggling to meet potential clients and then convince them that they are worth a damn1. So there I was, a new financial advisor, all bright and shiny and full of hopes and dreams. And there I was one fine day and wooing a prospect who came into the office to speak with little-old-me about putting some money into stocks and bonds.
“Where did the money come from?” asked I.
“A recently liquidated real estate portfolio,” said he.
Cool. So I went to speak with a senior advisor and mentor about this potential client. I told him where the money was coming from.
“Oh,” said The Mentor and disappointment in his voice.
“What!?” asked I and panic in mine.
“Oh, you’ll never get that money,” said The Mentor, “real estate people aren’t stocks people.”
Imagine me there, suit and tie and watching as a ton of bricks dropped from the highest floor and onto my face. And onto my hopes. And onto my dreams. And they all laying together there on the floor and in pieces like a shattered window or a vase dropped and ruined.
While the statement ‘Real estate people are not stocks people,’ is not one hundred percent true2, I have found it to be true enough to be a heuristic. Heuristic is just a fancy-pants way of saying ‘mental shortcut so that I don’t have to think too hard about something.’ You might also call it a generalization or perhaps even a stereotype. Real estate people are not stocks people: true enough. Stereotypes are stereotypes for a reason. As The Mentor predicted, I did not get the client. The potential client poured every dime back into another real estate deal. Real estate people like real estate. Stock people like stocks.
I did some soul searching toward the end of that first year. While I loved the idea of stocks and bonds and portfolios, while I loved the research and the numbers and all of the vast data to which working for a big outfit like Merrill entitled me, I didn’t exactly love putting money into stocks. The more I learned about stocks and the stock market and the culture and system and all of the hoo-ha that has grown up around it, the more I’ve come to the conclusion that it is all so much paper and hot air - more than anything I think it is a Ponzi scheme. On my breaks in those days a person would find me dreaming and scrolling through the ranches listed on LandsofTexas.com (I guess not much has changed there). A realization soon hit. I looked into the depths of my soul and discovered that I, dear reader, am a Real Estate person.
Another mentor while I was at Merrill told me to look for potential clients like me. “You will attract clients that think like you,” he said. Well crap, thought I, that does not bode well for my career as a stock broker. I resigned shortly after.
I am a real estate person. Because you can touch it. You can feel it. You can change it. With a little shrewd dealing and elbow grease, you can take a forgotten, dusty, old property and transform it into a grand estate. That can be worth a lot of money. It is also, and this I think is more important than profit, immensely satisfying and gratifying to see one’s work take shape. To see a plan come together. You just can’t do that with a stock. And you can’t do that with a bond. Real estate just suits my soul.
All that said…
I look at the stock market every day (and you will see me comment on it here). I also read business news. Mostly I do this to get a feel for the broader economy. Because it is my belief that 90% of the economy (and all the decisions of which it is composed) is sentiment. And the stock market is a great barometer for the prevailing winds of sentiment. I also think it is important to study bonds, especially treasuries, because those influence consumer interest rates for things like… Real Estate. And the equities (stock) market also effects bonds and rates. So while I am not a stock person, I do think it is important to understand the stock market. Because when the stock market catches a cold, the Real Estate market might catch it too.
Oh, and if you are a stock person then I hope that you will forgive my curmudgeonly take on the equities space. I mean no offense. Some of my very best friends are stock people; we have merry discussions on the risks-benefits-rewards of each of our markets. And I am happy to banter ad naseum with any and all takers.
Speaking of markets, the People are feeling a squeeze…
I observed a couple of interesting, possible data points in my own community this week. I attended a parent meeting for my son’s middle school football team. The coach was discussing all the myriad knick-knacks to buy that come along with such an adventure. Then he mentioned something along the lines of: ‘I know we are all struggling right now. If there are any parents that you know of that might need some help paying for these items…’ He went on to mention resources available to help. That sentence kept ringing in my ears: We are all struggling right now. I glanced around the room and noticed more than few nodding heads.
On the way home from this meeting, my son mentioned his new class schedule and how many of his old teachers were no longer at the school (two of them his favorites). He said, and I quote, “The good teachers always leave. I guess they just don’t pay them enough.”
I am equally intrigued and suspicious when my antennae wave at these little anecdotes. Are they so much confirmation bias? Are they actually signals? Or are they just more noise in an already noisy environment. I am not sure yet. But I definitely take note.
A word from our sponsor…
This publication is sponsored and heavily supported by the phenomenal land professionals at the Grand Land Company. I am proud to be included in their ranks as a Realtor and land specialist.
Texas Land This Week.
The following information comes from LandWatch.com. Data Disclaimer3.
The 29 Regions of Texas
As of August 19, 2022 there were…
13,222 acreage properties listed as Available
1,195 acreage properties Under Contract
8 properties up for auction
Five counties with the most listings:
Grayson County - Texoma Region (276 listings)
Hunt County - Dallas Prairie Region (258 listings)
Smith County - Piney Woods North Region (225 listings)
Edwards County - Edwards Plateau West Region (221 listings)
Erath County - Cross Timbers Region (207 listings)
Price trends for the listed counties…
For the last 7 days there were…
608 new properties listed
7 new properties under contract
0 properties identified as Sold
Five counties with the most listings in the last 7 days:
Grayson County - Texoma Region (14 new listings)
Hunt County - Dallas Prairie Region (14 new listings)
Wise County - Fort Worth Prairie Region (13 new listings)
Hudspeth County - Trans-Pecos Region (13 new listings)
Van Zandt County - Dallas Prairie Region (12 new listings)
Price trends for the listed counties…
News from the Front.
What agents are saying:
1031 buyers are active right now. There are more than a few who just sold a bunch of over-valued properties in the past few months and want to exchange those proceeds into something further out of town. They are all cash and willing to pay full price for the right deal.
The market feels like it is equalizing. It is good to be a buyer for the first time in a long time.
The spread between seller expectations and buyer expectations is still pretty big. Sellers seem to be stuck on last year’s sales data.
Seller’s don’t want to miss the boat and are more motivated to list sooner.
What lenders are saying:
I had an opportunity to catch up with a lender friend this week. He works with Capital Farm Credit (ag land lender). We drove around a very brown and crispy ranch and gabbed a long while about real estate. He noted a definite slowdown in loan volume. We also agreed on the obvious: last year was crazy and this year is hitting the brakes. He mentioned that rates on land were mid-sevens this week on a 20 to 30 year ARM. Long-term loan products (20 plus years) with a fixed rate could be north of eight percent. Regarding interest rates, there is sticker shock amongst potential buyers given the historically low rates of the past couple of years. However, given historic inflation and the Fed’s signal that it will continue to raise rates, now might be the time to pull the trigger. Leveraging land with a loan and keeping your powder dry (cash on hand) could be the right move for someone anticipating future deals.
Important News.
Interest Rates (Compliments of the Mortgage News Daily app for iOS and my iPhone).
Financial Markets (compliments of the MarketWatch app for iOS and my iPhone).
UST2’s and 10’s are still inverted!
Recommended.
Lords of Finance by Liaquat Ahamed. As you can see, I still have over 2 hours of listen time remaining for this book. But I have listened to 16 very interesting hours thus far and am comfortable in recommending it. This is a recommend for those interested in financial history and how our modern global economy got its start. It is well researched, well written, and the narration is excellent. Next up… Mao’s Great Famine by Frank Dikotter.
High by Caitlyn Smith. I love music. I don’t often listen to the radio but when I do it is KOKE-FM in Austin. I first heard Caitlyn Smith’s song Tacoma (not on this album) on KOKE and was blown away by her voice (and the song). She recently released this album and my kids are already sick of me playing it. But I just can’t get enough of this girl’s voice. She is a power singer with amazing vocals, a blues-rock feel, and great lyrics. Her other albums I would rate a B+. This is an A+. I enjoy every song on it. Highly recommended.
Where I get my information:
An analyst’s analysis is only as good as the information they possess. As the old programming saying goes: garbage in-garbage out. The following is a list of my sources…
I follow a bunch of smart people on Twitter. A sample is represented above. You may also follow me on Twitter:
The Amazing Realtors with the Grand Land Company
LandWatch.com and LandsofTexas.com
MarketWatch App (market quotes and data)
FRED: Federal Reserve Economic Data, Federal Reserve Bank of St. Louis
North Texas Real Estate Information System and Heartland Realtors
Houston Association of Realtors
This is a lot more difficult than it sounds. The Pareto Principle applies to both industries. Twenty percent (or maybe as few as 10%) of the professionals in both fields are doing 80-90% of the work. Put another way: for every successful Realtor out there, there are about nine standing behind him/her barely squeaking by (or not doing anything at all).
Most people of means like a bit of both stocks and RE in their portfolio but I’ve found a certain weight favored toward one section or another depending on the person.
Disclaimer: The information in this newsletter is based on properties that are greater than 10 acres and which I refer to as ‘acreage properties’. This information is single source. Which means that this is NOT an exhaustive list of all properties available and sold everywhere in the Great State of Texas. Texas is a non-disclosure state and is therefore a Dark Market. This means that there are a great deal of data that are hidden, dispersed, not allowed to be shared publicly, or just plain unavailable. The following information is for reference and entertainment purposes only.