Episode 180: Is it the right time to invest? Tune in to find out!
In today’s show, Pancham interviews Ivy Zelman – Chief Executive Officer of Zelman & Associates and a sought-after expert on the housing sector.
With her 30 years of experience, Ivy is highly respected in the housing industry for her precise assessments which have helped industry leaders avoid costly mistakes and helped them seize opportunities! Through her value-added research, she has received multiple recognitions in the housing industry, including being named as one of Wall Street’s most powerful women!
Want to invest but don’t know if it’s the right time to start? Or should you wait until the dust finally settles? Well, this episode is perfect for you! Listen as she discusses the dynamics that influence home price inflation and imparts her knowledge by analyzing the housing market.
Listen and enjoy the show!
Tune in to this show and enjoy!
- 1:18 – Pancham introduces Ivy to the show
- 4:28 – Her background on the housing market and doing value-added research
- 8:08 – The leading factors that contributed to asset price inflation
- 15:34 – Why remote work trends in 2022 would be influenced by your industry
- 19:27 – Her prediction on why inflation would not slow down anytime soon
- 23:54 – The phenomena that drive homeownership and home price inflation
- 29:31 – Why the multi-family cap rates would continue to compress
- 38:54 – Taking the Leap Round
- 38:54 – Her first investment outside of Wall Street
- 39:24 – On having no fears when she invested in her property
- 40:02 – Why her start-up investments didn’t work out
- 42:00 – Why investors should diversify their investments
- 43:14 – How you can connect with Ivy
3 Key Points:
- The U.S. currently has a low inventory in terms of its households which mitigates some downturns. Thus, residential real estate is actually a good hedge against this inflation
- In the current inflationary environment, it’s best to diversify your money by having investments in real estate, hedge funds, and/or having cash itself as your asset.
- Doing your due diligence can be a step to starting your own firm. Another thing that can help encourage you to take the plunge is the support from the people around you.
Get in Touch:
Welcome to the gold color investor podcast with your host Pancham Gupta. This podcast is dedicated to helping the high paid professionals to break out of the Wall Street investments and create multiple income streams. Here’s your host Pancham Gupta.
Hey everybody, it’s Robert helms host to the real estate guys radio program and congratulations for getting educated and listening to The Gold Collar Investor.
Pancham Gupta Welcome to the gold color investor podcast. This is your host Pancham really appreciate you for tuning in today. There is a lot going on in the economy. Inflation is getting out of control and the Russia-Ukraine conflict and war is going on. However, if you go out to buy a piece of property or a house, it’s really really hard to buy someone who has never bought a piece of real estate in their life. Right now. It is an extremely difficult time for them to buy. So if you have been thinking of buying, is it the right time to invest? Or you should wait for some time before the dust settles? Well, I have a treat for you today. I have Ivy Zelman on the show. Ivy Zelman is a Chief Executive Officer of Zelman and Associates holding. It’s roughly 30 years of experience covering housing and housing related industries. In 2007, Ivy co-founded Zelman and Associates. The firm provides analysis across all aspects of the housing spectrum. Ivy’s concept for the firm remains strongly rooted in the ability to perform thematic research, overlaid with proprietary surveys to produce unparalleled differentiated value added research, Ivy has been widely known and respected for her bold thinking and accurate assessments, where others failed, helping industry players avoid costly mistakes and capture game changing opportunities. In 2005, she called the top of the housing market from their Ivy call the bottom of the housing market in January of 2012. Thus reinforcing her dominant reputation within the industry. She helped a best selling writer Michael Lewis with research related to the mortgage crash. This became a part of his best selling book turned movie The Big Shot, Michael wrote in the book, all roads lead to Ivy. Her convictions have been recognized by Institutional Investor ranking her as one of the most prominent figures in the housing industry. For the past three years Ivy has been included in the Barron’s 100 most influential women in US Finance as one of the most powerful women on Wall Street. Ivy Zelman is a sought after expert on the housing sector and what the overall housing market means for investors, home builders, industry executives and the economy at large. She frequently appears on television shows such as CNBC in major publications, including Wall Street Journal, and has acted as a key witness in a congressional hearing. Jim Cramer, the host of CNBC show Mad Money, said Ivy is the acts of the homebuilders, the analyst who understands the group better than anyone else on Wall Street. With that, I would like to welcome Ivy on the show. Hi, Ivy, welcome to the show.
Ivy Zelman Thank you for having me.
Pancham Gupta It’s an honor to have you on the show. I you know, I’ve been trying, I told my assistant to get you on the show, because I’m really curious to know your thoughts on what’s going on around the world. There are a lot of crazy things happening and yesterday FED increase the rates by 25 deaths. And, you know, I want to talk about that and a lot of things that can impact our listeners about investing in stock market or in real estate or any different kinds of asset classes. So before we get started, are you ready to fire up my listeners break out of Wall Street investments?
Ivy Zelman Sure, let’s talk about it.
Pancham Gupta Great. So you know, tell our listeners about your background, people who don’t know you like how you got started, how you got into the place where you are in right now?
Ivy Zelman Well, I have been studying the housing market for actually since ’92. So 30 years old saying that, actually, to be fair, I did start out in investment banking, and corporate finance for two years straight out of undergrad. So 28 years in actually studying housing, and really inequity research which for those familiar with sells citing research each sector that the investment banks cover is designated to have someone do nothing but learn everything they possibly can about that space, and follow stocks that are in that ecosystem. So I covered homebuilding stocks and building product stocks early on. And about 15 years ago, I started my own, hung my own shingle, and decided that I could go on my own and take my expertise and expand it to include other areas within the silos of the housing mosaic. So everything from mortgage, real estate services, prop tech, as well as building products more expanding into the home centers, and the multifamily single family rental market. So our firm covers nearly 60 stocks. And we as a boutique, I recently sold a majority stake to a public company called Walker Dunlop, that we’re now a part of that platform. And really what we do that’s differentiated and which really is allowed me to be successful. We called the top of the housing market, admittedly early, really late ’04 and continued to stay cautious until we got really bearish and December of ’06, we were neutral to then really waving the flag that this is a big red flag that this is going to end badly. And then we called the bottom of the market in 2012, and January of ’12. And really, our secret sauce is made up of many of ingredients to make these calls. But it really is very dependent on a foundational view of what’s going on with the cycle. And that’s with demographics sort of leading the charge. And then layering on top of our foundational view via the demographics is really understanding what’s happening, I call it boots on the ground. So we have relationships that over my career that we have created with C suite executives that are in each of the various silos I mentioned, predominantly private companies. The nice part about the housing industry is that it’s very fragmented. So you can find private companies that are willing to provide you their perspective at the C suite in exchange for research that you can provide them. And that really grew to be a core part of our overall perspective and helped us in tough times when we were contrarian, stay grounded, and continue to build upon that, you know, jokingly, I love meeting new industry executives, as much as getting new jewelry is what my husband would have said, you know, but I don’t know if that’s 100% True. But I do love meeting new industry, people and always are looking to learn. And just think of myself as a student of the industry.
Pancham Gupta That’s awesome. There’s so much to unpack there as my head is racing with so many questions. I want to actually get into if we have time, into your mindset when you quit your full time and you went on your own 15 years ago, that takes a lot of guts and you know, something that not many people do. And me and I always talk about that phase of the thoughts and whatever you were going through on the show if you have time. But you know, before we get into that, I have two questions. So you’d call the bottom of the market in 2012. And then you call the top of the market in 2006. Right. There is a lot going on in the economy today. In the last two years, some unprecedented things have happened, starting with the onset of pandemic, then lockdown stimulus packages, moratoriums, elections and now out of control inflation. And on to add to all of this Ukraine war, right, that’s happening. So it’s been a roller coaster ride, right? At this point, asset price inflation is happening at a record pace when you take any asset class, I know stocks. It’s been a roller coaster right there lately. But if we look at long term horizon, it’s been up and up and up, right. And it’s been fueled by fiscal as well as monetary policy. So at what point? Should it change, if at all?
Ivy Zelman Well, first, everything you just described, we should all be taking some Xanax with everything going on the craziness of this economy. And some of it being what had been very positive in call it tailwinds stimulus, Child Tax care credits, delaying student loan payments, certainly access unemployment benefits, if you people weren’t getting evicted, they weren’t getting foreclosed, so that I call that cloudiness and really driving a lot of incremental cash flow for people that otherwise would have been constrained. And I think that’s enabled people to go out and buy homes that would otherwise not have been able to, according to Redfin, 25%, of buyers in 2021, use their stimulus checks for down payments, and 13% USD cryptocurrency gains that they were able to lock in to buy homes and use it as downpayment. So, you know, I think that mortgage rates plummeting, as the Fed policy continued to play liquidity into the market. I mean, at one point, they’re buying corporate debt. They’re in the market buying mortgage backed securities and treasuries and the liquidity was, you know, massive in terms of saving the economy, but they stay too long. And they believe that inflation was transitory. And you know, you could argue inflation in the 70s was transitory, it just lasted for 10 years, everything, even death would say his life is transitory. So I think we’re dealing with right now headwinds that are growing with inflation, whether it’s, you know, going to the gas station or going to the grocery store or paying your rent, everything is on an upward trajectory. Challenging the consumer real estate has been a safer haven for some, you know, what we saw in the second half of 21 is an acceleration of what I call non primary buyers in the market, and a deceleration in primary buyers. And that doesn’t mean primary buyers are inactive. But you can just look at the number of mortgages that people are basically taking our down number of mortgage originations down double digits year over year in the most recent quarter, year to date, whereas the number of cash buyers, year over year are approaching 30%, which you can argue are investors because you can’t compete in the market if you have to get a mortgage. So I think that there’s a lot of dynamics that make it very complex. And there’s inflation in every component of trying to get homes built, as well as trying to get homes renovated. So I think it’s very, it’s becoming extremely challenging. But if you’re one of those fortunate souls that were able to buy a home, in the last few years, there’s been 5 trillion of incremental wealth created through home equity.
Pancham Gupta Yeah, it is crazy. We’ve been investing. Our business side is mainly multifamily buying apartment complexes. And it’s crazy in terms of how much liquidity has pumped into this market, generally speaking, and even single family homes now going back to your point that Redfin had 25% of the homes that were bought with stimulus money. Well, guess what that money is getting dried up, right. But you mentioned about supply side where not as many homes are getting built, because there’s so much of supplies, chain issues that are still there. And so if I’m a consumer, I don’t have as much money remaining in the pocket, because since stimulus checks are dried up, Child Tax care credits are gone. And then now, you know, you add five good dollars per gallon gas on top of that, and this increased food prices, so overall inflation, so I have less money to spend, right? And I have less savings as compared to what I did in 2020. There was checks and all these things were adding up and I was not going on vacations and all that stuff. So at the same time, the supply side is still constrained, right, based on what’s going on. So do you see, like you saw in 2006? Do you see this? This as a repeat of 2006 As of right now?
Ivy Zelman No, not as of right now. And I think that’s really because of all the equity that’s in the market. When we were analyzing the housing market in 2005. What we saw thanks to Greenspan it actually started in February ’04, I remember it like it was yesterday, we had Greenspan say, go get an arm, it’s okay. And we’ve sort of put the light switch on to the mortgage industry to introduce exotic mortgage products to offset the lack of affordability. So we had a tremendous amount of consumers able to buy homes with no money down, call them liar loans. Whereas today, with the exception of FHA and VA, which is still relatively small percent of the market, people are, you know, putting down equity in some cases, you know, anywhere as little as 5% to typically 10% On conventional and for jumbo, you’re looking at at least 20%. So I think that the equity in the United States is a somewhat of a cushion for all of the home purchases that we have seen over the last several years, there’s only 1% negative equity. You know, nothing in my mind that’s as euphoric as it is today, is likely sustainable. So I do expect, at some point it may be a year from now could be certainly more dependent on the municipalities approving lots and getting more of the development. We’re currently we have 1,000,006 units in backlog that combined from multifamily and single family these are, you know, homes that are going to be delivered both in those both asset classes. So as those homes get delivered, pricing likely moderates, and it’s much more skewed to what I call the higher growth markets, you know, where people are migrating to. So there could be corrections in those markets as that supply comes to market in the face of higher rates, which then triggers because a lot of that production or supply is going to come in what we call the tertiary market, where builders are forced developers are forced to go further out, where they can actually pencil returns because land is inflated by more than 35% year over year, and that’s nationwide. So the supply will likely drive compression in returns and profitability for those developers. And I think that’s more the likely outcome than a severe sort of GFC. As of right now,
Pancham Gupta got it. Got it. So you mentioned that, you know, growth markets versus tertiary markets, the growth markets, like some of these sunbelt states or, you know, Florida, Texas, a lot of these migration patterns happen because of pandemic, no one had thought that they could work from home, and now they’re living where they want to live versus the way they have to live. And do you see that going back? Or do you see that’s a permanent change?
Ivy Zelman Well, prior to the pandemic, roughly six to 7% of households between the ages of 20 to 64, worked remote. And the numbers now, arguably, are exponentially higher, whether it’s 30%, you know, depending on the market, but we are likely now starting to see as people are returning to the office more hybrid, where they might be in the office, you know, a few days a week, not necessarily forced to come five days. But my Chairman CEO asked all of the walker Dunlop employees to come back to work and be prepared that they have to come back to work. And we’re hearing more of that from other employers that are asking people to come back to work. So it’s very skewed and dependent on the industry you’re in. Certainly our health care workers, our teachers, our firemen, or policemen, our construction workers, or manufacturing workers, they’re not able to work from home. So I think that there’s going to be a moderation in that trend. I just don’t know where it stabilizes. But it has allowed for people, especially in white collar positions, or call it more back office, like accountants that are working or clerks or anyone who’s really chained to their desk on call centers that don’t have to interact necessarily with other people as much, they’re really working autonomously, you know, they may have an opportunity to stay working from home. So it’s somewhat job dependent. But think about $5 – $6 A gallon in Southern California right now are Northern California. If you have to drive to work and you live in Victorville, or Paris, California, and you’ve got to go into LA or something, you really going to find it difficult and challenging as your wallet shrinking. And so I think that there’s going to be some impediments for people to continue to be able to go sprawl out to where we are really call it drive to qualify. But one thing I didn’t mention is that the inventory in the United States, which we measure just thinking single family for a moment, as a percent of households, historically, we were at the lowest on record. So we have a very, very tight level of inventory. And that’s because we’re seeing so many investors gobbling up homes that can do so with cash. And that might even be, you know, a primary buyer that sold stock to buy a home or they’re getting a mortgage after the fact they’re refining. So there’s also that aspect of the market that mitigates some severe downturn, unless we start people, unless we start seeing people take advantage of the money they’ve made. I’ve been to many, you know, barbecues, or just chatting at cocktail parties, where people are like, Oh, my God, I’ve doubled in the last few years, my investment in this beach house I made, I think I should probably take some money off the table. And as the fed on your earlier point, is raising rates, you know, the cost of carry it, depending on how you’re financed, may make it more challenging to continue to carry more than one home, there’s a lot of moving parts, if you are fortunate to have several homes or you’re renting them out and you’re it’s a cash flowing, nice cash flowing return for you. You may be in an advantaged position, because you have that to supplement your income. And as incomes are rising, that is also helpful to offset this inflation. So I think residential real estate for those that have it in their portfolio is actually a good hedge against this inflation.
Pancham Gupta Right, right. So talking about this inflation numbers that came out at some point 9% And they are historically very high in back in the ’70s. They said that measure of CPI was different from what it is today. And if you use the same measure as what it was in ’70s. Today, this number would be close to 14-15%. So many believe at this point. It’s really hard to put brakes on this this and I know FED is reacting to this and they’re raising rates. What’s your take on this I know you mentioned transitory could be 10 years and 17. So is a transitory inflation, like, do you think this is as a 70s? Where it’s just 10 year long cycle for inflation? Or do you see it more like 12 months? What’s your take on this?
Ivy Zelman Well, I can only speak to the portion of the inflation that pertains to shelter. That’s my expertise. And the CPI 46% of CPI is basically shelter. And when we look at the numbers, the numbers for shelter are lagging by four months. And I just chatted with two industry C suite executives prior to this podcast, and one of which was a large operator in the multifamily market. And they were he was talking about renewals that are running at about 10%, on rents, and also seeing leases running at 16%. And he’s in, you know, the Texas, Florida Mountain States in his portfolio. And that’s not showing up in CPI at 4%. You know, and we track over a million units in the multifamily sector. So we have proprietary surveys, I mentioned the C suite executives that equate to nearly 1000 executives. But in each of the silos, were able to really quantify and aggregate and synthesize and triangulate data to understand where rents pre COVID You know, he said to me, quote, I used to do cartwheels, if we got to 5% Rent inflation. So now he’s doing cartwheels on steroids, seeing enough that are just off the charts, chartbusters, I call it then I was chatting with a large real estate broker, who was talking about their property management business, because they also are broker. In addition to being a real estate broker and having a very large transaction market or transaction business, they also property managers. And they were just saying that their, you know, number of property management, overall units that they’re overseeing, has been dwindling, because many landlords are taking advantage of the home price inflation. And they’re deciding rather than, you know, renew with the tenant, some of them are taking advantage and selling weather that really will be going on on a continuous basis. But the inventories are so tight, and they likely get tighter. And I’ll tell you why. Which is concerning. Is that, right now, if you look at the number of homeowners in the United States that have a mortgage, and that’s about call at 65%, they have 70% of them are locked in below four. So if unless you’re leaving New York to go to Miami or San Francisco to go to Austin or LA to go to Phoenix and think about the arbitrage, then I’m selling something that is going to provide a significant advantage for me to buy in this low cost state which is happening, the migration is real, yeah, you’re likely to be disincentivized to move. So that can constrain inventory even further. But you think about that arbitrage that exists between high cost to low cost. Not every person can do that. I mean, I think that today, we’re seeing significant acceleration for migration from high cost to low class, but that’s been going on for decades. It’s just much stronger than it had been historically. So I think that inventory is going to continue to be constrained. And home price inflation unless you know what breaks this is consumer confidence in interest rates. At some point, you know, the best way to cure inflation is keep raising prices, because at some point, the consumer pushes back and says no. And that can happen. And the question is when, and right now we’re not seeing any signs of slowing. I thought a 4% mortgage rate would slow things down. We’re currently according to Freddie Mac, today. 30 year fixed rates are 4-16, which you know, today, that’s the above that 4% threshold. So we’ll see.
Pancham Gupta Ya know, it’s crazy. The, you know, I want to hear your thoughts on this. Like, you know, you alluded to this earlier. So quantitative easing has been going on forever right now. Yeah, they stop in the in the middle, but then they started again, do you think that is if you were to kind of see, okay, out of 100%, what weightage would you give to all this liquidity that was pumped in versus on one side, and then you have interest rates, which is the cost of money? And then, you know, you have this inventory and supply chain issues, right? Oh, part of this. I always think that because of this weight of liquidity on one side is so much bigger because the amount of money supply in the last two years, it has almost like they increase it by 50% is so huge that it kind of dwarfs anything on the on the other side of the scale. So do you think that is the major part of this and would you think that quantitative tightening is something that when they start doing that at a massive scale, if ever that happens, would be the start of this lowness.
Ivy Zelman Well, you know that the real easing quantitative easing started during the great financial crisis. And you know, we’ve had pretty much a tailwind on and off since then. And tools in the Feds toolbox are now kind of played out where they really have to fight inflation. So they’re, you know, threading a needle is a nice way of putting it. I do think that if you just go back to ’19, and look at where we were in ’19, you can see that a good year for home price inflation was 5%. A good year for rent inflation was two to 4%. Exactly. Now we’re dealing with double digit home price inflation, double digit, high double digit home price, inflation, almost 20%, depending on the market, even excess of that. So I do think that the liquidity that was pumped into the economy, and the subsequent drop in mortgage rates, mortgage rates fell to 2.65 on 30 year fixed, you know, you look at the monthly payment for an entry level buyer trying to buy the median priced home, which is approaching 400,000. In the US. The monthly payment, let’s say for a new home is up about 30% year over year, it’s got a matter, it’s got a matter. So one stat for you, just to give you some perspective, is that during the fourth quarter of 20, we saw a spike in the number of renters that we’re becoming homeowners and homeownership actually troughed in 2016. So prior to COVID, we saw, you know, a nice upward trajectory of millennials that finally decided that they wanted to buy a home, which is really based on lifestyle, you know, you get married later than you might have in prior decades and you start having a few kids, it’s hard enough to stay married. And as 900 square foot, apartment, attic, few kids and it’s a recipe for divorce. So all of a sudden you got two kids, more than 80% of people that have two children that are married cohabitating will live in a single family home, not necessarily owning it, but they want more space. So that phenomena was driving homeownership starting in 16, which was later than we expected it to. But that really took off. But when you look at where now the consumer is faced with so many hurdles in 2020. In the fourth quarter, the number of renters that became homeowners skyrocketed from call it 2.12 point 3 million to almost 2.8 5 million. So it’s kind of hockey stick in our charts that we analyze. And that has now gone back through the fourth quarter 21 I don’t have first quarter yet. But that fell to 2.4 million, while at the same time, the market has only gotten stronger. And we’ve seen the number of investors and our I like to call it non primary because that includes all types of non the second homebuyer, private investor, institutional capital fix and flip. You’ve got liquidity providers, I buyers, the number of transactions in 21, and total 26% were from non primary. And in 20, the numbers were 19%. So as we see the renter converting to homeownership declining and probably my guess is it’s not because they didn’t want to buy, they just frustrated because they’re being outbid, and therefore, they’re losing out to these non primary buyers that have cash or access to significant capital. That’s really the dynamic we’re faced with today, that’s only going to get worse, and what deters the investor. Well, the private investor might be getting challenged on what would be just higher carry costs, not just interest rates, but just the ability to service the home and maintain the home and property taxes that are rising expenses arising at every category, we actually track 150 billion and aggregated manufacturing and distribution slash retail revenue. Through our proprietary product survey. We tracked nearly 30 categories. And in those categories, the price increases being announced following double digit price increases in 21 are exuberant. And they have no choice because their costs thanks to the war are rising with oil rising commodity costs rising and just the continuation of this robust market. So I think the primary buyers really losing out, unfortunately,
Pancham Gupta yeah, it’s very hard. I have friends and family who are trying to buy it’s just driving them nuts. The market, right? So shifting gears here, right going to converge.
Ivy Zelman One more thought on just to consider. One thing that we’ve seen is that there’s so much wealth that’s been created by a 30 year tailwind in the equity market, that there are many Gen- Xers and boomers and maybe seniors that are helping fun the younger generation with cash to buy. Yeah, and that’s an offset to some of the primary buyers that otherwise would be challenged, but that that goes to the question of the gap and the divided nation we’re in and the inequality that’s only widening. But I do think that that’s something difficult, while difficult to measure is also happening in the market. So those primary buyers are being supported by older generations. Right.
Pancham Gupta That’s a great point. So I want to shift gears now I want to talk about multifamily and commercial like, where do you think given that the FED has finally raised the rates after three years, right? Do you see cap rates compressing, let’s say more in multifamily,
Ivy Zelman there are people that believe multifamily cap rates will continue to compress, I think that’s really a function of the transaction market, the transaction market is benefiting from a wall of capital that needs to be placed. You know, if you look at all the institutions that are raising money, and whether it be significant, multibillion dollar institutions and global funds, versus even smaller debt funds that are raised by high net worth individuals, crowdfunding, there’s so much money, and guess what real estate’s a prettiest girl, the dance, everybody wants to own it. And so they investors will say you have to own more residential real estate to their largest capital providers. And so when you think about it, that’s why cap rates can continue to compress. And right now we have cap rates that are pretty much sub four in multifamily that are even in some cases, sub three. And these are vintages that even could be early 2000. That just don’t make a lot of sense. But the markets got to acquire assets to meet the thresholds that they’ve basically outlined to their investors, they don’t want to buy Office. Now office and retail could start coming back. We’ve seen more interest in urban, in multifamily where it had been during the pandemic, predominantly just suburban, the amount of inventory and backlog for multifamily right now is at the highest level since 1974. Single Family backlog is at the highest level to 2006. So we see a tremendous amount of capital that wants to be in residential real estate. So unless there’s a change in sentiment, by that institutional capital, I think that the cap rates could remain at these low levels and even compress further with one variable depending on if the FEDS going to tighten six times. And we’re going to see the cost of money therefore increasing, it’s probably going to take out some of those investors that are much more tied to that short end of the curve than those that are, you know, well positioned with longer term capital, lower cost debt for long term capital.
Pancham Gupta Right, and you make a such a good point. And you’re seeing all of that, you know, sub three and sub four cap rate buildings at this point, and in some cases, even pre 2000. So it’s going crazy. Alright, so I have last two questions for you before we move on to the second round of the show. My next question is, so what do you suggest I know you’re not a financial planner or anything like where are you investing in this market? Or where do you suggest people put their hard earned money?
Ivy Zelman Well, I am admittedly a little bit more weighted on cash, which I think that now it’s a question of where do I put that cash to work. And when that was a decision I made in November of last year, it looks pretty smart in hindsight, but the market is going to likely remain very volatile. One thing I learned in my 30 years is don’t fight the FED. As that is rising or raising rates, you know, I kind of thinks being on the sidelines may not be a bad place. People don’t like holding cash in an inflationary environment. I do own some real estate, although that real estate is not a cash flowing real estate. But I think for me right now, I think it’s a combination of being diversified and having a little bit if I’m contemplating investing that cash, whether it be in fixed income, maybe some hedge funds that I respect some prominent investors, that that feels a little bit better than long, only right now. But even so there’s some very astute investors on the long only side that are looking for value opportunity. So just a matter of time before pulling the trigger. I think ’22 is going to be a tough year. So I don’t mind holding cash as my largest asset right now.
Pancham Gupta Got it. Got it. Wait. My next question for you. I want to go back to your days when you started. You know, Zelman associates, right? Just talk to us about the mindset that was behind. I know it’s been a while for you 15 years, like was it hard for you? Did you have fears to overcome to you know, quit your job and start this and if so, like, how did you overcome it?
Ivy Zelman Well, I think you know, anything that brings about change and uncertainty can be quite scary. But at the time, I always told myself if I go out on my own, I could always get a job. If it didn’t work out, and being Credit Suisse for a decade, and appreciating through a lot of due diligence, talking to institutional investors, would you know, if I had one on my own? Would you, you know, be still willing to buy my research? Or would you buy my research? And then talking to industry executives, would you still be willing to partner with me? And give me information? And it was unanimously Yes. And so having enough due diligence to feel taking that entrepreneurial plunge. For me, it was kind of like taking the shingle and just hanging out on a different piece of real estate and hoping that the name didn’t matter. And I certainly would put a lot of weight on the support I had, you know, my family support. My business partner, Dennis McGill, who’s been with me since he was a summer intern from Michigan who still with me today as my partner 22 years later. So there were really enough people around me that were encouraging me and thinking about back to that ecosystem, I mentioned, I only was covering two silos on building and building products. And I realized that I can really grow that platform to expand into areas that were followed by other sell side analysts at Credit Suisse. And I was stepping on a few toes writing about the mortgage market in oh seven we wrote a piece called mortgage liquidity underestimated mortgage liquidity does your underestimated no more. In July ’05, we wrote about piece of big dramatic piece and we do a lot of thematic research. But the one that back in ’05 was called Cradle. Sorry, one of I was investors gone wild. I think about a recent one we just did that was quite sobering on the US demographics called Cradle to grave. Quite contrarian, just given this sobering outlook of the US population, household growth is not what people perceive it to be. So, you know, those were the ingredients that led me to take the plunge. And, you know, I think it’s surrounding yourself with people that were extremely supportive, that allowed me to have that courage.
Pancham Gupta That’s awesome. That really tells you everything I asked this question to so many people and, and the support is your number one thing that comes into play. If you are an accredited investor, and have been thinking about putting your money to work for you, then I have good news for you. I have created an investor Club, which I call the gold collar investor club, I will be putting together investing opportunities exclusively for the group. These are the opportunities where I have done the due diligence for you and will be investing my own money alongside you. If you are interested, please sign up on the goldcollarinvestor.com/club, I repeat goldcollarinvestor.com/club, I will reach out to schedule a 30 minute phone conversation to discuss your investing goals. Once you sign up, this can be a good opportunity to diversify and take some chips off the hands of Wall Street to produce some passive income. And in case you were wondering, what is an accredited investor? Accredited Investor is someone who has earned more than $200,000 as filing single or more than $300,000 Filing Jointly for last two years. Another way to qualify as an accredited investor is if your total net worth is more than $1 million, excluding your personal home. It includes your stocks, 401Ks, IRAs, cars, etc. Just not the equity in your personal home. If this is you, I would highly encourage you to sign up. Well, thank you for answering all these questions. I want to move on to the next part of the show, which I call taking the leap round. I ask these four questions to every guest on my show. My first question for you is when was the first time you invested outside of stock market on Wall Street?
Ivy Zelman Well, fortunately, it was because of my investments on Wall Street. I invested in two stocks, the nose patch, which was to keep you from snoring. And the second one was called beurre brown that I made a lot of money in that allowed me to buy an apartment in New York. So that was my first one. My first plunge outside of stocks
Pancham Gupta guy. Did you have any fears that you had to overcome to buy when you were buying that? Oh, selling this? No buying an apartment.
Ivy Zelman Now I think it felt good because it was certainly not money that I expected to have. So the returns were significant and enabled me to to have enough down payment and looked at the rent versus rent rent versus own decision. So I don’t think it was as scary as I don’t recall it being terribly scary.
Pancham Gupta Got it. Got it. And when was that? What year had to be back in
Ivy Zelman mid 90s?
Pancham Gupta Probably night as well. Okay. Great. So my third question for you can you share with us one investment that did not go as expected?
Ivy Zelman Anything that comes to mind, some of the startups that I’ve invested in, that, unfortunately didn’t pan out, you know, you want to support entrepreneurs, and investing with them, for various reasons, things may not materialize. And so I’ve had a few zeros, unfortunately, that came about and learned a lot in that process, one of which was turned out to be a fraud, which was really disconcerting. And I think that allowing others to do the due diligence or allowing someone that reported to me, I can’t blame them entirely, but it just makes you realize how important it is for you to do your own work, and not just quickly support someone’s dream and perspective. And they were good lessons.
Pancham Gupta Yeah, you know, you do these things. And you come out on the other side thinking that, yeah, you made those mistakes, but you learn a lot.
Ivy Zelman I think it you know, adversity makes us stronger, we fall down, you know, we have to rise. You know, I actually published a memoir, in October called Gimme Shelter, I wanted to find a way to get the housing market included in the title and also a Rolling Stones fan. But I think that, you know, having ways to pay it forward and to share your experiences. And that’s really not about investing as much as just my, my story. But I think that, you know, I’ve learned a lot over my 30 year career, about the things that, you know, hopefully I can share with others that they can benefit from, but I do think that the market dynamics that we face today are extremely challenging. And just proceed with caution. And do your due diligence.
Pancham Gupta Right. Yeah, exactly. I think this leads me to my last question, and I want to talk about you more more like if people can get access to that. So my last question is, what is one piece of advice would you give to people who are thinking of investing outside of Wall Street, and that is into real estate or some of the other asset classes?
Ivy Zelman Well, I think you just have to be diversified. You know, don’t put all your eggs in one basket, and just recognize it’s almost like I tell people, the money that you’re investing, you have to assume that it’s going to go away, that you’re not going to get a return to feel comfortable that you have enough to fund your day to day living. And I think that, you know, taking big risk is certainly in this market, something that I would not encourage, I think that it’s extremely volatile. Today, we’ve got so much uncertainty, and waiting for, you know, where it becomes almost silly and stupid if it ever gets there. You know, certainly in our equity recommendations. That’s sort of our mentality. I don’t know if we’re going to get dislocations in real estate. But certainly if there are, you know, like the opportunity zone, some people capitalize on that through the Trump administration, providing that platform, but just be diversified and don’t take massive risk right now.
Pancham Gupta Cool. Well, thank you so much for your time here. How can people connect with you? And also, if you have more, more that you can share with the listeners, that’d be great.
Ivy Zelman Yeah, the memoir is a very quick read. It’s called Gimme Shelter, Hard and Soft lessons from Wall Street Trailblazer on Amazon. And if you are interested, we do have on our website access to a newsletter, as well as blogs that we provide at no cost. There’s research available to purchase ala carte, or in series on our website. So it’s Zelmanassociates.com. We welcome you guys to check it out.
Pancham Gupta Great, thank you so much for your time here today.
Ivy Zelman Thank you. Good luck, everyone.
Pancham Gupta I hope you learned something new by listening to the show, Ivy has some great insight to share she actually called the highs and the lows of the housing market. She was right both the times. I hope you can take some cues from the show and implemented in your life. And if you have any questions, do not hesitate to reach out to me my email is p at the gold collar investor.com That’s P as in Paul at the gold collar investor.com This is Pancham signing off. Until next time, take care.
Thank you for listening to the gold collar investor podcast. If you love what you’ve heard and you want more of pension Gupta, visit us at www dot the gold collar investor.com And follow us on Facebook at the gold collar investor. The information on this podcast are opinions. As always, please consult your own financial team before investing