'Home ownership in this country is still dead': Grant Cardone
Grant Cardone Entrepreneur and Author joins Yahoo Finance's Zack Guzman to break down the latest on the housing market, as mortgage rates set another record low.
Video Transcript
ZACK GUZMAN: I want to focus in on real estate because mortgage rates hit a new record low, dipping to 3.01% on a 30-year fixed loan, according to the Mortgage Bankers Association. That's leading to a new spike in refinancing activity, and also stoking some fear flashbacks to '08 and '09 about the potential for a new housing bubble as home prices continue to hit new highs as well. And here to break down the trends with us in today's road to recovery segment presented by International WELL Building Institute is real estate investor and entrepreneur, Grant Cardone.
And Grant, I love having you on the show so thanks again for joining us. I want to start with the fact that, you know, last year, you came on, this was before the pandemic hit, you said homeownership in America was dead. Of course, COVID hit, the Fed pulled a 180, started cutting rates to zero, and now median existing home prices are 35% above their prior peak back before the subprime mortgage crisis hit. So what are you watching for right now, and how real are the bubble risks today?
GRANT CARDONE: So, Zach, home ownership is still dead in this country because the only people that are buying homes right now are people that have equity, great credit, and a job. Everybody else is left out of this cycle. So the people that are moving money, right now, we have massive migration going on for big cities into-- for multiple reasons, politics, money, COVID, concern about their safety. You have tremendous migration right now, both out of cities, in the suburbs, but also out of metro cities into other parts of the country. California is moving to Utah, Arizona, Texas, all the way to Florida. By the way, we're seeing here 1,000 people a day moving in.
The-- the big highlights on the news about homeownership is being driven by the upper class because everybody else-- look, you've got to have 20% down after COVID. You did not need that before COVID. You need a job that is secure. They're going to look at how you actually went through March, April, May, and June with your job. If that was even slightly suspect, you're not going to get a home loan.
So on an average home, let's say, $300,000, you need $60,000 cash. You need better credit score than you needed before COVID, and you need a secure job. So this will-- this will spike for a while until the wealthier are like, OK, I'm done. I got my place, and then it will sag out again.
ZACK GUZMAN: And we've seen that with new buyers coming in here. Of course, obviously, low interest rates is good, but as we see, home prices getting pushed up. That does maybe price out that lower end buyer from the market. But beyond that, I mean, we're talking about, I guess, the risks here, and I'm not saying we are in for a repeat of '08 and '09, but there are questions about what it might look like the farther along we move in this recovery, if we continue to see that stall and the idea that we might see delinquency rates for mortgages start to rise.
We did see them inch up a little bit here in the month of August versus July at 4.087 versus July at 4.71. But still way below the peak we saw in 2010 at 13.8%. So, I mean, when you think about that risk, talk to me about maybe as we get further along, if we see unemployment stay high what that could mean as well.
GRANT CARDONE: Look, I don't think you see a housing crash. I mean, I haven't-- like, I don't even think about a housing crash. I think about-- I think about stalls. I think about a lack of interest, is what I said the last time I was there. Look, this is going to-- we're going to become a renter nation in this country.
This is going to feed apartments. The boom today in housing, all the housing starts, 80% of the housing starts in a country are apartments. Builders cannot afford to build new homes and sell them at a profit.
They can build 50 units, 100 units, 200 units in a location. That's why you see this happening in cities across America. Renting will become the economic choice and the desirable choice, again, because of this migration. When you have Amazon-- you know, when you have Amazon moving into new markets.
ZACK GUZMAN: Yeah, and you have--
GRANT CARDONE: Facebook-- yeah, go ahead.
ZACK GUZMAN: I mean, you have more than a billion dollars in terms of assets under management here and--
GRANT CARDONE: You cut me by-- you cut me by a billion two.
ZACK GUZMAN: [LAUGHS]
GRANT CARDONE: [INAUDIBLE] almost--
ZACK GUZMAN: You got to update your website then, Grant. You've got to update this website here. But listen, I mean, when we talk about apartments specifically, I mean, that's a large chunk of what you guys focus on, right, when we think about that. Obviously, you have insight into what's going on with the renter market.
Delinquency rates on rent still pretty much where they were last year, only about a percent lower than what we saw in the month of August. So talk to me about maybe some of those fears too maybe being overblown in terms of, you know, we see unemployment benefits rolling off at the end of July, you would have expected maybe an increase in delinquency. But what do you see in terms of the health of renters out there?
GRANT CARDONE: Well, Trump came in with all that money so-- you know, people-- the renter-- look, there's the law, and there's-- then there's natural law. The renter wants to improve the quality of their life, and they know they're not going to go out and buy a home tomorrow, particularly with what you're just saying about price-- the pricing increases across the board in almost every city in this country. So the renter knows, I don't want to not pay because if I don't pay Mr. Cardone his rent, the next place I'm going to start is going to be slightly less desirable than the last place I left.
So we're at 95-- 98.4% collected on about 94% occupied. We have lost nothing. The national average, I think, is around 82% or 83%. As long as you take care of the tenant, take care of the property, and don't overcharge people, you're fair in the exchange. When you have 8%, 9% unemployment, buying homes is not what you're going to do. Renting is what-- where that money is going to go.
And I can also tell you that the big institutions are selling-- they can't sell their hotels. If they need to redeem, if a big group needs to redeem cash right now, or put themselves in a more liquid position, they are not going to sell a hotel, they can't sell their retail, and they can't sell their office. So what are they going to sell? They're going to trade their apartments so that it looks better on paper.
And I can just tell you that the amount of money out there chasing yield today, our cap rates are in our portfolio compressed because of COVID. COVID probably made me up a 1/2 a billion dollar richer on the valuation of my apartments because there's no place to get yields, so the investor seeks to go to apartments, and is able to pay more because rates have collapsed as well.
