Housing market crash vs correction: What's the difference?

[00:00:00 - 00:00:25] Brett: It's five o' Clock Somewhere Real Estate Investor Podcast. Brett Bernard, Marissa Miller, Nick Gibson and Jeff McNett. And of course, Richard. Today we are going to talk about market crash versus correction. Master of timing and strategies for 2025 and going in 2026. Now that we're halfway through 2025, we're going to talk a little bit about how the housing market correction is affecting nearly half the country. So stick around. We'll be right back.
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[00:00:56 - 00:01:00] Brett: All right, so let's get into our topic of the day. Marissa, you have a question?
[00:01:00 - 00:01:09] Marissa: Yes, I do. Since we're going to be talking about the market crash versus correction, can you let the people know what the difference between the two is?
[00:01:10 - 00:01:34] Brett: Well, the definition of a market crash and a market correction, it varies depending on what expert you talk to. But basically a market crash is what happened in 08. It's where the entire housing market just collapsed. And the reasons that caused that were due to the Fannie and Freddie debacle and, you know, all the, they were loaning money to people just because they had a pulse and that created that situation. That's a true crash.
[00:01:34 - 00:01:35] Marissa: Right.
[00:01:35 - 00:02:07] Brett: But during that crash, certain aspects of the or certain markets in the country started to within, you know, 24 months. See a correction corrected it back to a. So we were at level one, the crash hit, we're down to like level eight. And then it corrected back to like level five, maybe level four. Does that make sense? So it corrected itself back. So when you look at a crash and a correction, that's not truly a correction, it's just basically the market stabilizing and things begin to move again. But that's a crash. I mean, crash is when everything just tanks.
[00:02:07 - 00:02:12] Jeff: Well, typically you see a 25, 30% decline in property values, too.
[00:02:13 - 00:04:14] Brett: Yeah, some 50. And this isn't the first time we've had a crash. I mean, everybody acted like that was the end of the world. But we had one in the 80s, had a big one in the 80s. It wasn't as bad as everybody. Remember Black Monday, that, that hit the housing market hard and they Saw a huge crash. It wasn't as bad as 08, but it was a big one, you know. But the good news is crashes recover way faster. Now, correction is pretty simple. In 2022, our market just took off. It's like somebody just lit a fuse and it just took off. And we went up in value. I think we went up in 12 months, 28%, like, boom. And I'm speaking about Memphis alone, because there are other areas of country did not see that. Some areas of country saw stabilization. We saw a takeoff. Now when that took off like that, everybody's like, holy crap, things are going to get out of hand. Prices were going way up. And all of a sudden investors went from wanting the 1% to just, I'll take 10% growth. So they were lowering their return expectations because values are up, but yet they were still buying. A lot of hedge fund groups were buying them sight unseen. And that drove that jump. A correction in that situation was getting into 2023. As interest rates went up, the rocket started running out of fuel, and then it just kind of stopped midair and then slowly started drifting backwards. And over the last two or three years, we've had a decent correction. Where we've gone from what I considered, and all of us probably consider that overinflated prices. Right now, if you're in California, you wouldn't think that our prices were over inflated. But if you were here in 2020 or 2019, you would say they were very inflated and it just happened in 12 months. So a correction basically is where a factor in the economy slows down the growth. And as that growth slows, it starts to correct itself. And a lot of times it'll come in and drop down 15% below where that top margin was. And they consider that a correction. We're not in a correction right now. We're not in a crash. We're at that point where the rockets sitting there with a little fuel dead in the air and just doesn't know if it's going up or if it's going to drop.
[00:04:14 - 00:04:15] Marissa: Kind of like at a standstill, a.
[00:04:15 - 00:04:41] Brett: Little bit dangling, in my opinion, if California, for instance. But you know, I can't speak to their corrections because I don't know what a correction would be for that. I mean, does that mean it's going to come down to 950,000? Which in my opinion is still ridiculous. But for them, maybe they see that as a correction and a correction is just going to correct the market and balance it, make it easier for people to buy. But none of that's really going to take hold until the rates are affordable.
[00:04:41 - 00:04:52] Marissa: Yeah. And so you can bring on your perspective, like you said, someone from California, you know, that might be a correction for them. For us down south in Memphis, we're like, that's ridiculous still.
[00:04:52 - 00:05:36] Brett: Yeah, yeah. So just look at it this way. If you take a home that drops from 1.2 million and you drop it, let's say it drops, it corrects. And now they're saying that home's worth 900,000. If the rates are still 7%, people still can't afford that home as that same home 900,000 five years ago when rates were 2%, 3%. I mean, your notes cut in half. So it was affordable. We saw a lot of people back in, when Obama dropped the interest rates really low, buying these 5, 6, $700,000 homes when normally based on their income, they can only afford 300,000. But the note was so affordable, they were able to buy those bigger homes. And those people have seen a significant, I think, increase in value, but now they're seeing a correction. I can tell you right now, Memphis is not in a correction. We're not in a crash.
[00:05:36 - 00:05:39] Jeff: If anything, housing prices may have flattened a little bit.
[00:05:39 - 00:06:27] Brett: They flattened. We're sitting there in the rocket not knowing if we're about to break the stratosphere or if we're about to just fall back to earth. We just don't know. I can tell you historically, in Memphis, we never do either. Right. Somehow that rocket just keeps pushing and we just keep inching up, inching up, inching up slowly year after year. We did see a correction in 23 and 24, 18%, probably 1518 total overall value. But it's kind of hard to predict that because on the sales side of it, on our new construction and rehab, those prices have actually stabilized. They didn't drop at all. We're still selling new constructions at 165, 170. We're selling them like that three years ago. We're still selling turnkey properties rented for, you know, 135, 140, which is what they're appraising at.
[00:06:27 - 00:06:30] Jeff: We had hoped they'd gone up new construction.
[00:06:30 - 00:07:00] Brett: Now I think a correction. I do think a correction for Memphis would be fantastic because it would spur the investment market. It'd spur it on because right now we have an abundance of inventory. And when you have an abundance of inventory, what happens? People sell their house less than what it's worth and investors buy and they set new comps. So through the, through the sales process this year. And then 23, we're going to see a correction automatically. Prices are coming down. Not because value, the value is not there. It's just because people sold for less than what they should have.
[00:07:01 - 00:07:10] Marissa: So speaking of investors, what should investors do during the housing correction? Buy just what they keep doing, what they've been doing.
[00:07:11 - 00:07:27] Brett: Because here's the thing. Correction, crash. I mean, whatever happens, the one thing I can tell you with a 100% certainty since 1932, whenever they started tracking it, is real estate has always come back and has always grown before further than its previous the last time.
[00:07:27 - 00:07:29] Marissa: Okay. It's like recycling.
[00:07:30 - 00:07:32] Brett: We've got a hundred years of data to support that.
[00:07:32 - 00:07:32] Marissa: Yep.
[00:07:33 - 00:07:49] Brett: So some guys may say, oh, well, you know, it's correct. I'm gonna wait till it corrects all the way, you know, all the way down and stabilizes. But that's not a smart investment strategy. Those are the people that sit on the sidelines for years waiting for the perfect scenario. And then three years down the road, go, man, I wish I had started buying three years ago.
[00:07:49 - 00:07:50] Marissa: Right.
[00:07:50 - 00:08:00] Brett: Because as we've talked about many times, you know, a half a point on an interest rate versus how much is it really affecting? 15,000 increase purchase price. That's not a good financial strategy.
[00:08:01 - 00:08:05] Marissa: The interest rate isn't affecting as much as the increase of the purchase price. Right.
[00:08:05 - 00:08:41] Brett: And Memphis is known for that. Like, as soon as our inventory starts to dive off the shelves, investors get competitive. And the thing is, we have investors from all over the world buying here and they all have their own philosophy and how their currency stacks up against the US Currency and whether they should invest in the stock market, invest in US Real estate. And there's factors that they consider when they do that. So once that happens, you know what's going to happen is that correction is going to stop, it's going to stabilize, and then we're going to slowly start moving upward again. It's almost like a yo yo, right? It's just a yo yo. It's going to go down, but it's always going to come back up.
[00:08:42 - 00:08:53] Marissa: Yes, it's a good time to buy rental property during a correction for investors. So how about home owners, like home occupant owners? Would you say the same for them.
[00:08:53 - 00:08:54] Brett: Or during a correction?
[00:08:54 - 00:08:56] Marissa: If you're buying a home, if you're.
[00:08:56 - 00:10:13] Brett: Buying a home to live in and you're trying to find that perfect home and perfect price, and let's say you're, you're approved up to 450,000. But the home you love is 520,000. Yeah. You wait for a correction and the danger of that is it gets down to 500 and then you think it's going to get to that 450 mark that you're approved for. Then all of a sudden it stabilizes and then it starts going back the other direction. So I would recommend during a correction buy absolutely regardless whether you can always look at what that property was worth a year ago and if it was up here and you're now down here, you know it's going to go back there may not be this year, maybe next year, but it's going to go back. I mean if you look at the, the correction versus the peak, that's what you can expect to gain in the next three years because it's going to go back there. I can't speak for California or Arizona or Chicago or southern Florida because those markets are completely different. They're animals of their own, which is why those markets take off like rockets and crash. I mean when they crash, they crash hard. So a housing market correction, there is no timeframe for it because there's so many key indicators in the economy and you got the interest rates, you've got the mentality of the buyers, mentality of the sellers. I mean all those things have to come together to finalize that correction and stabilize things. Some people say we've been in a correction. I haven't seen it, maybe a slow one, but it's been like that for two years.
[00:10:14 - 00:10:15] Jeff: I don't think we're in a correction.
[00:10:15 - 00:10:16] Brett: So there's no timeframe for a correction.
[00:10:16 - 00:10:18] Jeff: I don't think we're in a correction.
[00:10:18 - 00:10:19] Brett: No, I don't either.
[00:10:19 - 00:10:23] Jeff: We flattened out but I think with the interest rate drop next month it's going to start.
[00:10:23 - 00:11:08] Brett: For me a correction would be interest rates drop, inventory starts to blow off the shelves and now we've got inventory moving and stabilized prices and buyers buying. And that correction is only short lived because eventually your inventory runs really low and people start outbidding each other. And that drive, that's what happened in 22. Market goes, yeah, goes crazy. Double edged sword of that. As soon as the market goes crazy, guess what? Something's going to happen, right? Something's going to have to stop that rocket from taking off out of the stratosphere. Something's going to have to happen and that's when if the economy gets squirrely and interest rates go back up and slows things down and you get in this vicious cycle. So I'M hoping that our Fed is smart enough to see that when things do take off, don't freak out, let it ride for a little bit. And then when, if it gets out of hand, then you bring it back in the check.
[00:11:09 - 00:11:18] Marissa: So that leads me to. So we say, you know, it's a good time for buyers to buy during a correction. How do you feel about sellers during a correction?
[00:11:18 - 00:12:07] Brett: It's bad for sellers. Just knowing a correction is, is never an increase in value. A correction is just bringing prices back to a normal level. Right. Whatever out extenuating circumstances or outside forces has, has driven those prices up. Like in 2022, that was just those, those numbers were fake as hell. Right. Guys were paying $180,000 for a house that last year was worth $140,000. I knew why they were doing it. Hedge fund groups were buying it because they knew rates were going up and values were going to go up because of rates. But the thing that puzzled me the most is they didn't sell off their assets. They held onto them. And now we've got a correction going on for half the country. So all those over inflated prices they paid, it's like they're losing that growth. So I'm not sure about their strategy and why they would do that. It's bad for sellers. It's good for buyers. I mean, let's face it, I mean.
[00:12:07 - 00:12:08] Marissa: A couple of times, whether they're investors.
[00:12:08 - 00:12:25] Brett: Or homeowner occupants, you're getting a property that you can, you can go back and look at the history of it. Twelve months ago, here's where it was. Well, I can buy it here. Common sense tells you it's going to go back there and probably exceed that in a short period of time. So that's a good time to buy.
[00:12:25 - 00:12:28] Marissa: It's only good for sellers once it gets out of hand.
[00:12:28 - 00:12:32] Brett: Sellers. The problem for sellers is that they're not going to make what they want for the house.
[00:12:32 - 00:12:34] Jeff: There's too much inventory, too much competition right now.
[00:12:34 - 00:12:35] Brett: Right, Exactly.
[00:12:35 - 00:12:39] Jeff: But here's the bottom line. Sellers aren't budging. They're not caving.
[00:12:39 - 00:12:40] Marissa: Yeah.
[00:12:40 - 00:12:45] Jeff: You know, I agree. You've got a property and it's got a tenant in it and it's generating cash flow.
[00:12:45 - 00:12:52] Marissa: Even the ones that are, even the ones that aren't rental properties from investors, those are still not really. Yeah.
[00:12:52 - 00:13:42] Brett: The correction we're seeing in Memphis, not compared to the rest of us, is because of sellers selling below what they probably should have sold that house for. Well, and setting that base. And I'll give you an example. We have, Mario, five new construction. We got five of them appraised, same buyer. Four of them one block away, appraised at 165. And one one block away, appraised at 160. Exact same house, exact same color, exact same floor plan. Everything in those houses are identical. Five grand different. Well, now, the problem is, is that 160 appraisal number, we had to put it up at 165 and get a $5,000 credit so we could register sale 165. If we hadn't done that now, those comps for those homes would have been set at 160, at least for the next six to eight months. So that that trend there is what is the only reason I think housing prices in Memphis have even come down at all is because people are selling for less.
[00:13:42 - 00:13:44] Jeff: Well, they are, but I mean, they're not giving them away.
[00:13:45 - 00:13:49] Brett: No, they're not giving them away, but they're, you know, five grand on a 165 house. It's a significant decrease.
[00:13:49 - 00:13:57] Marissa: They haven't hit that point, Jeff, that you're saying where they're like, you know what? I want to get rid of the house. I'll take XYZ amount less.
[00:13:57 - 00:13:58] Brett: You know, give you an example.
[00:13:58 - 00:13:59] Marissa: Barely budging.
[00:13:59 - 00:14:26] Brett: We're doing a pretty sizable flip in Collierville. Nick's company's doing all the rehab on it, and we've discussed listing that property. Right. We know what it's worth, 550. But we've thought about listing it at 490. Right. 500 and just moving it quickly because it'll move quickly at that price. It was good for us, but it sucks for the neighbors because guess what we just did? We just lowered their price per square foot tremendously. So now that person's home that was worth 600,000 is now worth 520.
[00:14:26 - 00:14:28] Jeff: Yeah, well, that'll correct itself.
[00:14:28 - 00:14:29] Brett: Well, that's why I call it a correction.
[00:14:29 - 00:14:31] Jeff: That's why they call it a correction.
[00:14:31 - 00:14:31] Brett: Yeah.
[00:14:31 - 00:14:36] Jeff: And it may take 12 to 18 months for that particular house to correct itself. But it'll correct itself.
[00:14:36 - 00:15:45] Brett: Yeah. If values drop 20% or higher, that's a crash. In my book, if your house drops 5 to 12%, that's a correction. I think if you exceed 20% overall values in a short period of time, that you can classify that as a crash. A crash doesn't have to be catastrophic. It doesn't have to be 50, 60% of your value gone overnight. I mean, that would be. That's what happened in 08. But a crash can just be something that kicks into gear the correction that we've been needing anyway because everything's so overpriced. So that's why I'm saying there's no way to really equate what a crash and correction what the numbers should be or how long it should take because there's so many outside factors with our Fed, with the US dollar, with other investment types of investments and portfolios that factor into real estate. Right now it makes more sense for an investor to put his money in the stock market than to buy a rental property or put it in rental because the amount of interest he's going to pay and the return he's going to get, he can do better in the stock market. Currently a year from now they'll move all their money back into real estate because they make, it makes sense. I can only get 8 in the stock market but now I can get a true 10 or 12 or 14 in real estate. So that all is going to be part of the correction. All of that's going to play into that. And there's no way to predict that.
[00:15:46 - 00:15:52] Marissa: And it's funny you said there's no way to predict it because my next question is kind of like in the future question that.
[00:15:52 - 00:15:53] Brett: I'll tell you what I don't know.
[00:15:53 - 00:16:00] Marissa: Do you think the market will crash again? And I mean just based off of like the facts. Right? Because it's a recycle.
[00:16:00 - 00:16:02] Brett: We're never gonna see, we're never gonna see an O8.
[00:16:02 - 00:16:06] Marissa: How many years do you feel like it'll be before this market crashes again?
[00:16:06 - 00:16:48] Brett: It'll never be an 08. But I will tell you that we repeat the same mistake over and over again. And that is right. Things rates go up, things stagnate, the economy gets kind of fluffy and soft and then things switch and it starts going back the other way. Instead of us being because we're greedy, we start buying and buying and buying. Consumers start spending money left and right and that creates that same scenario. I would say go on a 10 year cycle and if you've got the right administration in place, they can manage that. If you don't, it becomes catastrophic. The 08 is never going to happen again because we don't do those types of loans. We don't have. We're not giving loans to people simply because their eyes are open or their breathing. And we learned a valuable lesson from that and hopefully we'll never repeat it.
[00:16:48 - 00:16:56] Marissa: I was gonna say they don't give those loans Anymore. But who's to say they won't, you know, like you said, repeat themselves and make something similar and then here we are again.
[00:16:56 - 00:17:18] Brett: Yeah, well, we, we. The America has a tendency to repeat itself sometimes. So I hope the next huge crash like 08, I'm long gone by then. But you know, if you want to know what the future is, I got a recommendation. Go to the mall. Going to Spencer's and buy you one of those little eight balls. Ask it. It'll tell you the truth and you'll know nobody's listening.
[00:17:18 - 00:17:19] Jeff: Ventures gifts.
[00:17:19 - 00:18:32] Brett: Yeah, get you an A ball. Is the economy gonna crash? And they'll probably say very likely. Yeah, it's like it's such a generic. There was like oh my God, it's gonna crash. Okay, so how can you profit from a housing correction? Let's take our house in Caryville, Jeff. Let's say we finish that home off market corrects and we sell it for 490. But previous numbers we looked at said that house can go as high as 600,000. If you're a smart investor and you go back and look at the historical data of that property over the last just say 10 years and you're buying it at X. But you've seen these other higher numbers in the past. History has shown us that it's going to go back to that level and higher beyond. So you can profit from a correction, you can profit from a crash. But the problem is people get scared mentally. They get jacked up during corrections and crashes and they don't think straight. They freak out thinking the world's coming to an end. I saw so many people in 08 unload tons of property for pennies on the dollar because they were terrified they were going to get eaten alive and it was just going to collapse and it was over. Smart guys bought up all those properties for pennies on a dollar and five, six years later were worth millions of dollars. So that's how you profit from a correction or a crash.
[00:18:32 - 00:18:34] Jeff: There's some home builders.
[00:18:34 - 00:18:35] Brett: It's not. Listen, this isn't rocket science.
[00:18:35 - 00:18:52] Jeff: There were some home builders 2010, 2011 that were buying lots for 10 cents on a dollar, just scooping them up as quick as they could. They still have some of those lots in their inventory to this day. They bought so many of them and they have just profited. Multi means.
[00:18:52 - 00:18:57] Brett: Glenn and I flipped 22 lots in Cordova for 8,000 a piece.
[00:18:58 - 00:18:58] Marissa: Wow.
[00:18:58 - 00:20:09] Brett: From a bank. Bank had taken them back from the builder and they were just trying to make themselves Whole get their money out. And we flipped those out to. I don't remember. May have been Anthony. Anthony was running a building company at time he bought them from us. But even they got a great deal on them. So you can profit from these, these corrections. You can profit, you know, obviously that with the high interest rates you're going to cut into your profitability. But if you're not buying to try to turn it next, you know, in the next 12 months, it's pretty simple. Buy it and hold it. Rates correct, market corrects, let it start going up, refi it down to a lower interest rate and let it ride until you think you've hit a point where you want to cash out. It's no different than your stocks, no different than your bitcoin. You know, you watch the market. If you know Bitcoin reached 120,000 and you're buying it at 80,000 a pop, you know, it's probably going to go back there. Maybe not, but there's a good chance it can go back there. The housing market, you have concrete evidence it's going back to that level at some point. May not be this year, maybe three years from now, but it's going to go back. You can still make more money in real estate than you can in the stock market any day of the week. So how bad is the current housing market? Correction? I don't think it's bad at all. I just don't. Now 50% of the country, according to.
[00:20:09 - 00:20:10] Marissa: This, they look at Richard, he's like.
[00:20:10 - 00:20:11] Brett: Well, he's trying to correct.
[00:20:12 - 00:20:17] Marissa: Call me out on his face is like, well 50, 50% Texas and Florida.
[00:20:17 - 00:20:39] Brett: Because they've got major metro areas that have seen a dip of 25%. Yeah, yeah, that's what I'm saying. Definition, that's a crash. Correct. Now Texas, parts of Texas may have seen a crash. Dallas, Houston, I know a lot of California, Southern California has definitely seen a crash. They're 30% down. But at the same time, to me, a crash is when the entire market nationwide crashes.
[00:20:39 - 00:20:40] Marissa: Yeah.
[00:20:40 - 00:21:03] Brett: National, a singular market crash. They did that to themselves. Because when all of a sudden, you know, take Nashville for instance. You can't buy a three bedroom, two bath house for under 800,000 in Nashville. I mean it's just ridiculous. I'm looking at brand new homes that Rudy was looking at. He sent them to me and wanted me to make offers. Three bedroom, two bath home, Brentwood, $1.2 million.
[00:21:03 - 00:21:04] Marissa: Yeah, that's given.
[00:21:04 - 00:21:06] Brett: Well, but it's Nashville.
[00:21:06 - 00:21:09] Marissa: Yeah. And that's Giving California couple years ago.
[00:21:09 - 00:21:18] Brett: Everybody jumped into Nashville. I want to buy a Nashville. It's a great. Well, guess what? All those folks that bought and saw that huge rise have now seen a huge crash.
[00:21:18 - 00:21:21] Jeff: Nashville's borderline crashing right now.
[00:21:21 - 00:21:23] Brett: It's the worst place in the country.
[00:21:23 - 00:21:24] Jeff: To invest in right now.
[00:21:24 - 00:21:28] Marissa: They probably hit their cap like their.
[00:21:28 - 00:21:31] Jeff: Nashville, Tennessee is the worst place in the country to invest in right now.
[00:21:31 - 00:21:52] Brett: According to realtor.com well, the problem, the problem with markets like Dallas and Houston and San Diego and LA and Nashville is you've got to be a genius to time that perfectly because there's so many little factors that will spin that market upside down overnight and you lose all your equity immediately. But yeah, I guess there are 50% of the country is suffering from that.
[00:21:53 - 00:21:54] Jeff: I'm not saying it here.
[00:21:54 - 00:22:58] Brett: The good news is for Nashville, Dallas and Houston is that those folks are going to while they're seeing a significant decrease, buyers in the future there are going to get good deals on properties, so they're going to be able to get in and ride that next wave up. Now, if you're an owner occupant, buying a home to live in, that's good for you because you're going to be there 15 years. You don't care if it drops tomorrow and goes back up the next week. If you're an investor, that's a dangerous game. You can go up to Lawrence. One of my investors moved back up to Maryland and he just bought a home for 500,000, rehabbing it. It's going to sell for 1.8 million. But since he's purchased the home and started the work, the values dropped to almost $40,000. So he's watching his projected profits shrinking. So he's desperately trying to get it done and get it back on the market. It's just a dangerous game when you're dealing with those big influxes and Nashville is one of them. Texas has a good a lot of areas like that. While, yes, 50% of the country is suffering under what they call Correction, if it's 25%, I'd call that a crash. That's a big jump. If you have your stock portfolio drops 25% tomorrow, they're going to call that a crash. If the stock market drops 25% of its value tomorrow, that's a crash.
[00:22:58 - 00:23:08] Marissa: Hopefully, since investing is still, you know, doing decent here, the people that was investing in Nashville and other areas, they'll come invest in Memphis.
[00:23:08 - 00:23:12] Brett: Well, at one point and we. We're still in the top three.
[00:23:12 - 00:23:17] Marissa: Yeah. So that's what I'm saying. Nashville, they probably hit their cap, like hopefully those investors.
[00:23:17 - 00:24:26] Brett: What happened in Nashville is you had a bunch of people from California who decided they were going to move their money to Nashville and make, you know, double their money overnight. And a lot of them did. On paper. You know what that house is worth to you cash wise, if you still own it? Nothing. Your equity is equity. Right? It's not, it's not liquid cash. And they all held out thinking it was going to stay there and it probably will go back. So a lot of these folks that maybe plan on cashing out of it here in the last year or two are now going to sit on it to probably 20, 27, 28 until things get back to the levels they were at. Every market's isolated, Every market's got its own, it's its own animal, if you want to put it that way. But that's why I can't sit here and say we're in a crash or we're in a correction nationally, because that's not happening to us. It's happening in Dallas, but it's not happening here. So to hear a national expert talk about the housing crash or the housing correction, that's a broad brush. I mean you can't. I know places in Louisiana where I can still buy a house for $50,000. The four bedroom, two bath here in Memphis, you can still buy four bedroom, two bath house for 165,000. So I guess it's, it's hard to get a crash or correction is in the eye of the beholder. That's what I want to say.
[00:24:26 - 00:24:30] Marissa: It's hard to give a comparison when you're not licensed in California.
[00:24:30 - 00:24:49] Brett: Well, I just don't think you can just broad stroke California with, with Tennessee and, and Texas and Chicago and maybe Arizona. You just can't do that and say, well, it's, we're in a correction. Oh, we're in a crash. You live on your planet and your plan is jacked up. I live on a different planet. That's not so you can't tell me to believe that we're all in this huge recession.
[00:24:49 - 00:24:54] Marissa: I would say it's nationally when it's over a certain percentage. But 50, 50, I mean it's just 50, 50, it's half.
[00:24:54 - 00:25:00] Brett: You know, there's still a lot of great. Memphis is still ranked the third best market to invest in in the country.
[00:25:00 - 00:25:06] Jeff: We sell real estate in Memphis and it's not happening here, which why we're in the top three.
[00:25:06 - 00:29:00] Brett: Let's talk about timing again. Go to Spencer's, get you an eight ball, and it'll tell you exactly when to buy and exactly when to sell. There's no way to predict this. If you want to be a smart investor, you pay attention. And I often preach against coattailers watching other people. But that's also a good indicator. And my indicator is the Japanese, only because I've worked with them and Glenn worked with them a lot. And they buy and sell in Memphis, and they move their money from here back to Tokyo. From Tokyo back in the U.S. it just flushes back and forth. And Mr. Taniyama was in town, and I asked him why he was moving his money. He said, because the US Dollar has weakened and our currency is stronger, so we're putting it back into our market. And then when that switches the other direction, it's going to come back. So they have their own timing issues. So it's hard to predict when to buy and when to sell. A lot of people don't. I know people that invest in the stock market. They watch the stock market and they pay attention to indicators. For some reason, in the investment market for real estate, a lot of people don't. And I think it's because they've gotten set on this cash flow model instead of being a true investment. If you buy stocks strictly based on cash flow, it's a dumb investment. You're buying it because you hope it grows. And you build asset wealth, you build equity. Same with real estate. So predicting when to sell, when to buy is what I would do. What I do is I. For me to know when the market's about to kick off, I just watch what my Japanese guys are doing. And if they all of a sudden start calling me and they're buying, I'm like, listen, they're smart. They see things way before we do. And when they start buying, that's when I know we're about to kick off back into 23. A lot of our Japanese investors started putting their houses on the market and selling them. And I knew at that moment, I don't want to admit it to myself, I knew at that moment they saw the US dollar weakening. They saw where their money was going to be better protected and perform better in Japan. So they started selling and moving it back. I am getting calls from Japanese investors right now. They're not buying, but they're inquiring. They're calling me, what's the market like? What do you think about this? What do you think about that? So they're preparing Themselves for that inevitable takeoff they feel is coming. So for me, that's my indicator. So find yourself an indicator that you can follow easily. You can't base it on interest rates. If you base on interest rates, you'll never be a good investor. Never be a good investor. Find market analysis. Find. Start tracking property movements in that market. You know, how many houses sold in the last 90 days, how many houses are on the market. And you can, you can get a good feel for what's happening. And when I start seeing our inventory, which is shrinking slowly, but as soon as that starts to pick up a little bit, I guarantee the Japanese are going to be coming in here and buying up everything they can get their hands on. And that will move things off in the right direction. That's the only way to predict is just watch key indicators that you're familiar with the, that you understand and don't listen to experts, don't go to seminars and have them tell you what to do, because they'll lead you down the wrong path. But I mean, let's face it, every good investor who's made any money in investing has key indicators that they watch. Which drives their investments, how they invest, what do they invest in. Do they diversify now or do they put some in real estate, some in stock market? A lot of big investors dumped all of their money, a ton of their money, into the real estate investment. A lot of people don't understand why. It's difficult for me to kind of grasp. But I guarantee you, in the next 48, 24 months or so, they're going to start offloading the real estate and pushing that money back into the markets, the investment markets, the gold, the bonds, they're going to start moving it back in. So watch hedge funds. If hedge funds start unloading their properties, that means they feel that we've hit our peak. Right? There's nowhere else to go in here, which I think that's stupid because we never hit a peak in real estate. If they start buying more property, that tells you that it's going the other direction. That's a good indicator. You can watch. Just please don't make your indicator interest rates. That's the dumbest way to evaluate investments. Yes, you get a lower return.
[00:29:00 - 00:29:08] Marissa: So caught up on interest rates, though, like when you buy stock talk it's like just the interest rate, as if there's not other factors.
[00:29:08 - 00:30:29] Brett: Well, the first thing when you do, when you're going to buy, when you want to buy stock, is you go look at the history of it. What's it done? When you look at the history of something, you pretty much can not predict with 100% certainty, but you can kind of know, okay, over the next 10 years, I should be here. Housing market is the same way. If you base everything on cash flow, then the only indicator you need to watch is interest rates because that affects your cash flow. Your payment minus your rent affects. That's how much cash flow you're making. Lower the interest rate, lower the payment, the more cash flow you make. But that's just not, that's not wise investment because you're never going to be a retired millionaire off of 2, $300 a month each house. You'll be a retired millionaire when you own 10 homes that are worth 150 grand apiece paid for 20 years from now with the cash flow as a bonus. Classic signs of the correction in 2025. No crash indicators, which means this is a great time to buy and you should be prepared currently to buy. I don't see Memphis's market going any lower than it is today. Matter of fact, if we'd have gotten our interest rate that we predicted five times previously that I lost three bottles of Johnnie Walker over, we would have already seen the market prices going the other way. Now there's talk that Powell's going to. Well, not Powell, but the board has pretty much unanimously stated that they feel interest rates need to drop at their next meeting. That's coming up at the end of this month. Or is that September, Joe?
[00:30:29 - 00:30:29] Jeff: Mid September.
[00:30:29 - 00:30:30] Brett: Mid September.
[00:30:30 - 00:30:38] Jeff: I'm 100% convinced they're going to drop at a quarter of a point. Well, Look, I'm also 100% convinced that they're going to drop it another quarter point by the end of year.
[00:30:38 - 00:32:17] Brett: Well, I am not speaking for California, not speaking for Texas, because their crashes or their corrections have been more severe than ours. So it's going to take them. The harder the crash, the harder it is to recoup. But in Memphis, because of the way ours is handled, that's kind of stabilized. I think that will move market values the other direction. It's not going to be significant, but we're going to start to see slow increases in those market values. What will happen is that interest rate drop will be an indicator for a lot of investors and they will then say, okay, well, now maybe I'll start buying as they start pilling around in the market and looking at properties and putting contracts out there, that's then going to drive other investors to that. Well, they're doing it. I'm going to do it. Once that ball starts rolling, those inventory numbers are going to start being bought and dropped. And as soon as that happens. Now, the guy that's got that 3:1 listed for 125,000. Now, he's only got, you know, there's only 500 of them on the market instead of 4,000 of them. He's going to be like, well, I want, I'm going to list it140 and see what I get. And I guarantee you somebody probably walk in and give him 138 and that's going to kick it off in the right direction. I'm truly hoping that happens before Christmas. I don't know if it will, but Memphis is such a unique market that small changes like that changes the complete dynamic of our investment market. All right, well, thanks for listening to us today, Nick. I appreciate you participating over there. If you want to want to reach us, call us at 901-692-7401 or go to our website, mymenphasinvestmentproperties.com on our site. You can send us messages. We'd love to hear topics that you want us to discuss. You can just reach out to us if you're interested in talking about maybe getting started in buying investment properties. If you're going to, now's the time. Or you can call and just ask Jeff to wake up.
[00:32:18 - 00:32:21] Marissa: I'm like, nick's microphone's behind his head. Jeff's sleeping over there.
[00:32:22 - 00:32:37] Brett: Thanks for listening. Have a good day. For more common sense real estate tips, listen and subscribe at 5 O' Clock Somewhere podcast.com. the 5 O' Clock Somewhere Real Estate.
[00:32:37 - 00:32:40] Jeff: Investor podcast is a sound ideas group production.