Jason Hartman talks with in-house economist Thomas about how interest rates in the past 10 years have compared to one another. The two explain why interest rates can be so difficult to predict and how these past 10 years are compared to the past.
I really need to thank you and Sarah for being there for me, you guys could have easily said, This isn’t my problem. This is your problem. Your lack of due diligence is entirely your fault. And not done anything at all. But you guys have been there for me every step of the way. You responded on voxer at 342 in the morning, I know, it might have been 642 depending on where you were, but honestly, who works at that time. So just the fact that you guys were there for me. I appreciate it so much.
Welcome to the creating wealth show with Jason Hartman. You’re about to learn a new slant on investing some exciting techniques and fresh new approaches to the world’s most historically proven asset class that will enable you to create more wealth and freedom than you ever thought possible. Jason is a genuine self made multi millionaire who’s actually been there and done it. He’s a successful investor, lender, developer and entrepreneur who’s owned properties. 11 states had hundreds of tenants and been involved in thousands of real estate transactions. This program will help you follow in Jason’s footsteps on the road to your financial independence day. You really can do it. And now here’s your host, Jason Hartman with the complete solution for real estate investors.
Jason Hartman 1:21
Welcome listeners from around the world. This is Episode 1214 1200 and 14. And thank you for joining me today as we take a look at the last nine or 10 years of interest rate history and we talk about some world events and maybe how rates go up and down and why they go up and down. And we’ve got our in house economist Thomas young here with us to dive into this fascinating topic. Thomas, welcome How you doing? I’m doing well. How are you? Good, good to have you. So I have to make a confession that I have been Many times, you know, some people just can’t admit when they’re wrong. But I like to think that I can admit when I’m wrong. And I have been terribly wrong about predicting interest rates. I mean, I’ve been good at a lot of other predictions. Very good. Actually, pat on the back noted, but interest rates Wow. Don’t go with anything I say when it comes to interest rates. My prediction skills have been pretty miserable on the interest rate side, or interest rates. I mean, I think they’re very hard to predict because they don’t really go with the market. When you’re looking at mortgage rates. First off, the Fed doesn’t directly control mortgage rates, but they indirectly control them obviously. And then you know, they’re not really based on free market forces if they were seems like you couldn’t predict them. And of course, the maybe one of the more reputable sources for interest rate is grants interest rate observer, sort of a high end Waukee news. letter that he puts out. What do you think about interest rates in this whole game of rates? Yeah. When you said interest rates can’t be predicted that that takes me back to the 70s when economists had built these models, and they went out to businesses and said, Hey, we can predict where interest rates are going hire us to do your modeling and to do your predictions. And one reason that was probably very important in the 70s, is that at least during the latter part of the 70s, we saw very high interest rates, I mean, exorbitantly high interest rates that went into the first year or two of the 80s. Right.
Yeah, I think so. And the economists, they came in and tried to predict interest rates and as, as you already know, they can’t it’s it’s somewhat I don’t know, I mean, they’re not completely unpredictable, but it’s driven by forces that sometimes you just can’t tell what’s going on.
Jason Hartman 3:53
Right? Yeah, it really is. It’s a fool’s game to try and predict rates with any degree of accuracy, but we certainly can review interest rates and by the way, when you mentioned the 70s, I was gonna say, when you said, I remember it takes me back to the 70s. And I was going to interrupt you and say when they had such great music. I mean, I tell you folks, I’m a really corny person, but I love some of that old 70s music. I mean, it was just, well, it was before our massive cultural decay. The music is romantic, and it’s sweet, and it’s just the human. And it’s just really nice. I like the 70s music. I mean, every decade has its share of good and bad music, of course, but man 70s I think my first romantic feelings were developed back then. Yeah, the music was good. You know, they say you always like the music and tell me if you think this is true. You always like the music that was popular or that you liked When you became an adult when you came of age now there was a little before I came of age, but you know, they still play the older music on right, but yeah, what do you think of that?
Oh, hearing you talking about the 70s It makes me wish I had had a video of watching you dance to Rod Stewart. That was awesome.
Jason Hartman 5:18
Oh, you mean it means the Masters? Yeah. Rod, the Rod Stewart peak was in the 80s. Right. I mean, I remember that. 80s but I don’t know. Maybe it was I don’t know. Maybe it was. I think you’re right,
I’m sure right.
Jason Hartman 5:32
Yeah, that was good. Now we’ve, you know, I always wanted to get into the world of producing musical events. And now I’ve done two of them with tribute bands. We, you know, of course, meet the masters. The first year we had our journey tribute band. And then last year, we had our Rod Stewart tribute band just a few months ago, and we’re going to have more folks because music is is good and everybody’s having fun. You know when you see the video All of that, unfortunately, the camera man did not pan to the rest of the room. So you just sort of see the stage and like right in front of the stage. And, you know, there were a lot of people dancing all around the room that you did not see in that in that shot. But I’m a big music fan. I think music really is the universal language. It’s pretty awesome. But hey, are we talking about interest rates? Or maybe we can make music here with interest rates?
What do you think? Oh, I was once asked to give a solo to sing in church solo. And after the first part of it. I was asked not to sing anymore.
Like me, I don’t want
Jason Hartman 6:39
Yeah, yeah, I was in my church choir in the 90s. And I loved it, but I just do not have talent. So I’ll stick with the spoken word. Everybody says I’m good at that. But yeah, I don’t think singing Probably not. So I feel your pain they’re telling us definitely do. Okay, so hey, let’s not go back as far as this 70s or the 80s, or even the 90s, or the early 2000s? Let’s just go back to 2010. And what was going on in 2010? And tell us about interest rates back then.
Yeah. So what I did is I, I was wondering, you know, over the past 50 years, when were the top 10 years for interest rates, and the reason being is I thought, well, individuals say that interest rates are low right now. But is that actually the case compared to what you know what was going on? So I, I came up with a top 10 list and number 10, was 2010. Yeah,
Jason Hartman 7:35
okay, so 20 and 2010. It looks like mortgage rates were about 4.69%. So quite low. And there were some world events going on. And and then you charted the median price here on your document. Tell us more about that. Yeah, so
in 2010 4.69%, a new the median home price of a new home was 223,000 of a new property is a priority, not not 223,000 what was happening in 2010? Well, we had the Haiti earthquake, we had the BP oil spill, the US started withdrawing from Iraq. You know, there were tensions between North and South Korea. In 2010. We first heard of Wikileaks, we saw the Canada Winter Olympics. It’s been nine years. I can’t believe it’s been nine years. But Obamacare was passed in 2010. And, wow, that dad,
Jason Hartman 8:29
I can’t believe it’s been that long either. That seems like it was yesterday that Obama and Nancy Pelosi or grinning at what 2am on Sunday morning or Monday morning, technically, but yeah, when they got a pass, what a disaster that was, but a lot of disasters early in remember what 2010 was like, I want you all to think back to 2010 as we were, you know, arguably coming out of the Great Recession, but there was still a lot of Fear there were a lot of depressed minds back then. And a lot of people who were scared nobody knew if we were really coming out of it if things would collapse again and there’d be another crash. And there will always be more crashes folks, that’s just the nature of the beast, obviously, but it was a scary time back then, wasn’t it?
Yeah, unemployment for example, in Europe was close to 20% it was if you were a labor wasn’t a great time, you know, just coming out of the financial crisis still concerned about what the decade would look like.
Jason Hartman 9:39
But it was a great time to be buying some properties. Some income property, wasn’t it? Oh, I should have bought back then. Yeah, shoulda coulda woulda that’s what we all say. I say, you know, I remember the deals we had for our clients back then. And I’m thinking I should have just been greedy and bought them all for myself. I couldn’t buy all of them. I didn’t have the wherewithal to do that. But I could have bought a lot of them, you know, I was quite financially sound during those times. One of my businesses wasn’t doing so well. But you know, the business is a separate entity from the person. And, yeah, it was quite an opportunity. You know, if you have the guts, and a lot of our clients didn’t have the guts to do it, they bought lots of properties back then and made a lot of money. And we’re, we’re glad to have helped them do that. But we didn’t have enough clients do it back then. But you know, we had some, and, boy, they’re sitting pretty right now. They sure are. I mean, I wish I knew how many people we have enriched from, from all of her stuff, because, you know, we don’t follow them unless they sort of raised their hand and speak up. We don’t know if they sold their properties if they bought them in 2010 and sold them in 2012. For example, they would have reaped a little profit, but the big profits obviously would have come if they kept them. That would have been great. So 4.69 percent Haiti earthquake BP oil spill. The Gulf Coast was lots of environmental damage with that we started withdrawing from my rack. WikiLeaks first time we really heard of them. And now we see Julian Assange, you know, in jail and not doing well health wise, and I hope he makes it because I think, listen, love him or hate him, I think he’s up. He was good for the world in a lot of ways in that he really exposed a lot of things with WikiLeaks. And, and I think that was, you know, that was a real contribution. So, you know, look, some of you may say, Well, that’s ridiculous. You know, he gave away US military secrets. I don’t know. I don’t really buy that. You know, you should see a movie called The Fifth Estate. The media is considered the fourth estate and I think this movie’s called the Fifth Estate. It’s great about Wikileaks really good came out several years ago, so good stuff. Okay, so you ranked that is number 10. What’s number nine? What year is that? we’re skipping around here by the way.
Yeah, number nine was 2018 mortgage rate was 4.54%. Barely good. Last year we saw Mugabe resign world’s oldest leader, we had the winner games equity markets collapsed at the end of the year. You always saw the royal wedding. Kinda cool. I don’t know if you’re into that. I’m not
Jason Hartman 12:24
the my mom sure is my mom and my aunt Joan, you both You know, they’re both big real estate investors. You’ve heard them on the show before and they’ve talked about their self management strategies and they love any Royal Wedding stuff. My mom yesterday was boxing me in a panic. She said Jason, turn on the news. Look at Trump is in England. He’s meeting with the queen. You can’t believe the pageantry. It’s incredibly I’m like, Mom, I’m working. Okay. But she loves that stuff. Yeah, so the median home price back then or not back then but last year 325.
Yeah. So mortgage rates. I have this ranked so number 10 is a higher mortgage rate than number nine, number eight as lower. So I haven’t ranked in terms of number one is the year with the lowest mortgage rate ever Got it?
Jason Hartman 13:12
Got it. Got it. So, you know, this is not chronological, obviously. And so 325,000 was the median price and the mortgage rate was 4.54% in 2018. And your number eight ranking is 2011. Right? So we’re kind of going back and forth here. Tell us about 2011.
Osama bin Laden was killed in 2011. We had that massive tsunami in Japan. Hard to believe it again. But Steve Jobs died eight years ago.
Jason Hartman 13:43
You could buy a house for 225,000 just $2,000 more in terms of the median price than it was the year before, right? Not much.
And then number seven is this year. It’s the seventh best year for mortgage rates ever. 4.3% so Far, at the beginning of the year, I think most analysts were saying mortgage rates were headed to five, but that hasn’t happened. It’s
Jason Hartman 14:06
gone the other way. And we’ve talked about that ad nauseum we, you know, the Fed told us they would raise rates, but they didn’t. So, yeah, everybody had every reason to say rates were going up, because that’s what we were told, you know, that it’s interesting, this Federal Reserve is so transparent, at least that’s my impression compared to past fed chairs, Jerome Powell, really just, you know, he just tells you what he’s gonna do, you know, versus Greenspan, the complete opposite, right? He was like, everything was a secret, and you’d have to decode his language. It’s very different, don’t you think?
Oh, I like the decoding better.
Jason Hartman 14:44
It’s more interesting, right? Yeah. It’s a game. It’s a game. It’s like hieroglyphics. Yeah. Good stuff. Okay, so So number seven is this year. This year is the seventh best year in history at least since we’re looking back five decades, right. So You can buy a house house price went down a little bit to three. Oh, wait. Now remember, this is of course the nationwide median. Of course, we’ve seen the high end cyclical markets soften up. So that’s why that price has come down low and markets still booming, or at least booming pretty well. Not maybe not as much as last year, but still very, very solid. And you rank 2014 is number six on your list.
Yeah. 4.17% was the average 30 year mortgage rate that is
Jason Hartman 15:31
now you know,
yeah. We saw the Ukraine unrest, the Malaysia Airlines and age 370. I don’t think that’s been found. It’s still lost. Wow. And that’s
Jason Hartman 15:41
been five years already. It doesn’t seem like it’s been that long, you know, and that’s, well, that’s when the Nigerian school kids were kidnapped. The World Cup. Germany took a World Cup of soccer. That
was great. I wish I had been there for that.
Jason Hartman 15:53
Yeah. And Ebola was a big deal in Africa. That’s too bad, right. Yeah. The reason why thing about these events is, you know, events. Lots of events happen throughout time and mortgage rates sometimes respond and sometimes they don’t. Right. But at least it It helps remind everybody of the context. I mean in 2014 that’s when there was the big upset in Ferguson the race riots over the police shooting and Robin Williams passed away without even pathways committed suicide sadly. And the Russian ruble went down the tubes right? Yep,
I’m glad I don’t own the Russian ruble.
Jason Hartman 16:32
There you go. And, and you can buy a house for $286,000 to 86. So you can see in four years from 2010 to 23, up to 286 and 2014. And let’s go to number five bonus
number 520 17. The rate was just below 4% 3.99%. Wow. We saw the the Mueller invest the You know, Trump takes office markets rather than collapsing, they boomed. North Korea was still a problem. We saw the me to movement. And I was just listening to this yesterday, but you were there for the terrible experience in Las Vegas. Yep,
Jason Hartman 17:14
I was there. I took a video of that terrible, tragic shooting. And I was I was at the Mandalay Bay hotel on the balcony. I heard what I thought was a jackhammer. And I didn’t realize for a few minutes that it was a gun and I looked down at that concert that was going on, and I didn’t know what was happening, you know, it was pretty far in the distance. And then it you know, the stage lights turned on, which by the way, they say probably cost quite a few lives. Had they left those lights off. You know, it would have been a tougher shot for the shooter. What a scary experience. I mean that for those people on the ground Wow. Just was awful. When I went downstairs, my friend and I decided we should leave. We were with Grant Cardone, actually, of all people. He was giving a presentation on his real estate fund. You know, we were there in a small group, and then walked out to the foundation room and looked over the balcony. And then there was the shooting going on. But when we got down to the lobby in the elevator, we saw a police running through the lobby. And you know, Thomas, I’ll never forget the look on one of those police officers faces. He looked scared. And I don’t think they really knew what they were exactly running to. But they were running through the lobby and they were heavily armed, not just the normal arm, some of them had the arms they took out of the locker or whatever. I just never forget looking at seeing one of those police officers and looking at his face and I don’t know it’ll just be one of those things. I’ll always remember I think, but um, yeah. Was that was that was terrible. So what’s our next year here? Okay, so 2013 year ago too, right?
Yep. One point lower 3.98% is the average mortgage rate for the year we saw the IRS target conservative
Jason Hartman 19:15
groups? Oh, I remember those hearings. Yeah. Well, the conservative groups were getting targeted by Obama’s Iran’s How disgusting was that shame on Obama for that that was bad. And they were trying to make it difficult for them to, you know, maintain their tax status. And I think they withheld tax ID numbers so they couldn’t start and all kinds of bad bad stuff in in Detroit, the poster child for big leftist government disaster files for bankruptcy that you’re right.
Yeah. Wow. What do you say about trying to think about? I mean, there’s a long story of why Detroit filed for bankruptcy, whether they can avoid it in the future and still and not really convinced that they will. Yeah. To continue the same sort of mindset, we’ll see
Jason Hartman 20:03
we keep looking at that market and we keep turning it down. A couple of our competitors are recommending that market, but we just we just haven’t quite gotten there. We’d love to have some more inventory of properties for our clients, but we will sell no wine before its time as the saying goes, and I don’t know, we’re just not quite there yet. We are talking with another potential local market specialist in the greater Detroit area, not you know, not some of the bad areas and we might do something there’s a possibility with them, but we just haven’t gotten there yet to recommend the Detroit market. So I don’t know. Maybe it’s our mistake. Maybe it’s brilliant. Time will tell, you know, wait 10 years, and then we’ll know
george Zimmerman was acquitted. This 2013 was the federal government shutdown over the debt ceiling. It’s been six years since Supreme Court found for gay marriage. That was
Jason Hartman 20:59
that was six years ago already? Wow, I cannot believe how quickly time is passing. That was the year of the Boston Marathon bombing and the Snowden leaks. Wow, that boy, my perception of time is really skewed. A little bit. Yeah. It’s amazing. We’re talking about 2013. Folks, by the way, and you could buy a new home for $266,000. Right? Yep. Number three is 2015. And mortgage rates then only 3.85%. Wow, wow. Wow. Wow.
Really good. Yeah. So when I think of 2015, I think of well, there was the Clinton emails issue, you know. But what I really think about is the European debt problems and specifically the Greek debt crisis. Yeah, that thing’s not going to go away.
Jason Hartman 21:53
You can’t fix that. It’s, it’s just a problem. So many of the countries in Europe are on the disaster in China is riddled with their own set of problems. It’s, you know, people like to criticize the US, but I don’t know, I think the US has got a better than any major player in the world. You know, if I’m sort of categorizing Europe, they’re into one lump, which is right and wrong at the same time. But Greece, Portugal, Spain, Italy. Most countries are not doing so well.
So, number 220 12 was the second best year for interest rates at 3.66%. Unbelievable. Wow, Facebook went public. Obama beat romney you know, I really have
Jason Hartman 22:44
So when that would happen, outside waiting,
Jason Hartman 22:49
you wanted to you wanted the world to end. Really calendar?
Yeah. Isn’t there a part of you that watches Walking Dead and things? Boy, that would be sure fun just to try it out. That way. World
Jason Hartman 23:00
Well, I don’t watch Walking Dead I think I’ve seen one episode my life never got into that one. But I get the idea. You know, we as humans and look at folks, all of you listening, you’re you’re human too. So I know you have it. We have these morbid curiosities about us. It’s a kind of sick. But I get the idea, you know, in having hosted while I still host it, but the holistic survival show that I started doing back in maybe 2009, maybe 2008 or nine, during the Great Recession, having hosted that podcast and interviewing well over 200 survivalist type people doom and gloom Murs, I really realized that that is, I mean, look, I think it’s good to be prepared, just rationally prepared, obviously, but the sort of survival culture, if you will, it goes to the point of a sickness. At times, and so whether it’s y2k, the Mayan calendar, civil unrest, currency collapse, and whatever is going to happen, right? We know, things will happen as time goes on, of course, but number one, they’re always wrong life goes on. And number two, some of these people, they spend so much time preparing for the world to end that they never really live in the first place. You know, your life should not be about preparing for the end your life should be about living. And, and you know, yeah, have some extra food and water and, you know, maybe some weapons and some first aid kit, but don’t go overboard. Right? It’s just, it’s irrational to go overboard. So yeah, so the world did not end with the Mayan calendar, thankfully, and unless we are living in a fantasy here, and that’s when they have the London Olympics, right?
Yeah, I’m not actually sure who came out with top and gold. Yes that year. I don’t remember.
Jason Hartman 25:04
But I knew home The most important thing was $244,000. And the number one year meaning the lowest interest rates. What year was that? drumroll? Thomas 2016. Okay, probably the biggest event of 2016 I think it jolted the world, right? Trump wins the presidency. Yeah, that was amazing. That was amazing. And compared to the alternative, I think it was good news. Not that I’m a huge trumper but compared to the alternative, I think it was good. I think you agree, Thomas, but I’m not actually sure of your politics. Do tell.
I don’t really know either. Yeah.
Because I sometimes think I’m conservative, but then like, I like Julian Assange. And I like, I like sort of the transparency stuff which doesn’t really align with Some things that concern certain part of the conservatives like
Jason Hartman 26:03
Yeah, right. Yeah, I know. You mean, but I don’t think it aligns with the liberals like either. I mean, I don’t think Obama was very transparent president at all. He campaigned that way. But he didn’t act that way. It didn’t happen in reality. I mean, he was I love on the CNN anchor, and Hockley. It was a CNN anchor, can’t remember the guys name. But he went off on this rant and said, the Obama administration is a bunch of jackbooted thugs, you know, they hide things and play games and manipulate the system and all kinds of things, and it’s hard to argue with them. But yeah, I agree with you. I like Assange. And I think that’s all true. So this was 2016. And you didn’t mention the rates. They were only 3.65% Wow. 3.65% tell us about Brazil and South Korea. Yeah, Brazil and South Korea booted their elected representatives. President were kicked out. You know, it’s an odd event. The Syria issue became in Brazil one of their criminal charges against their, their leader. I can’t remember now. Yeah. And then the same with Italy. Right. Nothing under certainly that year. I can’t remember when it happened. But yeah, there’s a lot of corruption around the world. For sure.
Yeah. We saw breaks it in 2016. knows, and we’re still talking about Yeah, well,
Jason Hartman 27:26
later hasn’t really happened yet, either. So we will see what happens there. The TPP the Trans Pacific Partnership. That was a flop, right?
Yeah, I’m not sure have very many officials than actually like that. I didn’t like it.
Jason Hartman 27:40
Yeah. And a new house would cost 305,000 in 2016 305. Right. Now, listeners. Here’s the big thing to think about. Think about the interplay between prices in interest rates. Typically, you know, you remember You’re not buying a house on a price, you’re buying it on a payment, okay, that’s what affects your cash flow as an investor. The important thing to understand is that approximately 1% in interest rate equals approximately 10% in price. So when you look at interest rate versus price that shows your cost of ownership. Now, an interesting part of that though, is it only shows your cost of ownership until you have a liquidity event that shows your monthly cost of ownership. But it doesn’t relate directly to your downpayment, or your final sales price. Because you have to put more money down if the property is more expensive. And even if interest rates are low, you might pay less per month, but again, it’s that interest rate versus price ratio. And again, these are just overall prices nationwide. So they don’t reflect the linear market versus the cyclical market. We’ve talked about that many times. And it also, of course, doesn’t reflect the hybrid market accurately. So this is a broad, very broad brush Thomas’s that makes sense.
Yeah, that’s how I describe it. Yeah.
Jason Hartman 29:15
Well, hey, thank you for sharing this with us today. It is fascinating to look back at things like this and kind of see how things have played out. Any closing thoughts? Oh, interest rates are still real low. Although, right. They haven’t gone to 5%. And it looks like they’re headed more towards 4%. It’s a great time. Yeah, it really is. It’s quite desirable still. And remember, with income property, you can constantly renegotiate the deal along the way. So if interest rates decline in the future, then you can refinance and you can improve your interest rate picture. So you’re never one of the beauties of real estate is you’re never stuck with a deal. You agree to the day you buy it. You always get to renegotiate The deal in various ways, in terms of the interest rate in terms of improvements in terms of how you market the property, all kinds of things. So, it’s just such a fantastic asset class a multi dimensional asset class. So, as the old saying goes, don’t wait to buy real estate, buy real estate, and then wait until tomorrow. Visit Jason Hartman. com, click on the properties link. And thank you, by the way to all of you who have sent me your spam, keep them coming. If you’re getting spam, you like that, Thomas? Yeah, it’s funny. If you’re getting spammed by a real estate company a list that you did not subscribe to send it over to us forwarded to us at reviews at Jason Hartman calm reviews with an S plural reviews at Jason Hartman calm send us your spam. We would love to see it. So send it on over and until tomorrow. Happy investing Thank you so much for listening. Please be sure to subscribe so that you don’t miss any episodes. Be sure to check out the show’s specific website and our general website heart and Mediacom for appropriate disclaimers and Terms of Service. Remember that guest opinions are their own. And if you require specific legal or tax advice, or advice and any other specialized area, please consult an appropriate professional. And we also very much appreciate you reviewing the show. Please go to iTunes or Stitcher Radio or whatever platform you’re using and write a review for the show we would very much appreciate that. And be sure to make it official and subscribe so you do not miss any episodes. We look forward to seeing you on the next episode.