Paul and Jim open the episode by discussing a challenge that often sneaks up on newly retired investors: trusting the process and letting their money work for them. The two advisors then acknowledge the difficulty of becoming a homeowner in 2025 and share a few different opinions about why the average age of a first-time homeowner is now 40. Listen along as they break down these takes and add their experience to the conversation.
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Paul Winkler: Welcome. This is “The Investor Coaching Show.” I am Paul Winkler, along here with Mr. Jim Wood, two weeks in a row. Jim Wood is in the house hanging out with me here today.
Jim Wood: They won’t let me go. They keep me chained up in the back.
PW: They keep you chained up in the back. Well, you keep escaping to get on the microphone. I’m not sure why that happens, but I can’t stop it.
PW: All right. Yeah, there is plenty, plenty, plenty, plenty to talk about. Some interesting stuff going on in the news with foreign governments.
I was watching the news as I came in here today, and I just kept grabbing stuff to talk about. We’ll get into some of the things that I found. There was a thing that we talked about a couple weeks ago.
Evan and I had actually talked about it, and I’m going to hit that before at some point during the show. It was regarding homes and affordability of homes, a really super interesting take on what caused the issues or what is causing issues for younger people and being able to afford homes.
I thought that would be something to go revisit because this guy had a take that I thought was fascinating. And then, lo and behold, I’m watching something today, and there was another take that somebody had regarding that. It was just all over the place. They keep hitting this particular topic significantly.
A lot of people say, “Well, that’s your most valuable asset.” Well, hopefully it’s not your most valuable asset. For a lot of people, it is.
You hopefully get to the point where you have enough assets sitting in investment accounts that you could have that money working. This is something I say, Jim, over and over to people. They come in here and they’re thinking about retiring, and I will say, “Hey, you’ve been at it at work. You’re at work forever.”
What’s it like to think about just saying, “I’m just not going to do this anymore. I’m going to quit and I’m going to just live off the money that I accumulated”? What’s it like? And usually, what is it like for them?
JW: Well, some people haven’t even thought about it, but it’s scary, right?
PW: It is scary.
JW: You’re looking out to the future, and it’s just that something … how you kind of usually summarize that is you’ve been working your whole life for money; now your money has to work for you.
PW: Yeah.
JW: And it’s just frightening to think about. I mean, for people to think about.
PW: If I’ve run it out, I can’t go back to work.
JW: Yeah. And then you’re worrying about markets, you’re worrying about what things are going to cost, you’re worried about inflation. All that stuff was there when you were working, but you always had the paycheck. You paid attention to that, and you saw your accounts go up and down, but it just means something different once you don’t have that paycheck.
PW: Yeah, you could always do something. It’s like the idea that if I have control over my life and I can actually physically do something, I feel a whole lot better than if I feel a little bit out of control. This is where you think about your entire life.
I was having a conversation with a guy about this. As a matter of fact, we were talking about control. It had nothing to do with work, retirement income, or anything like that. It had to do with his dogs.
The point is he’s getting really fired up with his dogs, and I said, “Here’s the reality, man.” I said, “We don’t ever have control like we think we do in life. We never really have control.”
I was getting philosophical, but I think about this when I invest. I’m putting money into companies. I’m buying companies and hopefully if I diversify …
This is the way we talk about it here, not the way the investment industry does, which is typically S&P 500 and 40% of your money is in 10 stocks. That’s not diversified.
I’m looking at owning 30,000 companies and in 50, 60 countries around the world. Now, think about this. Just look at 20,000 companies.
I mean, think about how many people work for that many companies. What is the sum total of the number of people? I mean, you’ve got 20,000 CEOs alone, people that actually run the company, then you’ve got how many people on the board of directors, how many tens of thousands, hundreds of thousands of people that are represented for being on the board of directors for those companies.
Okay, now we look at upper management for those companies. We look at lower management. We look at the rank-and-file employees.
How many people work for these companies? A lot. A lot. What are those companies doing?
They’re producing a product or a service, and their sole goal in life is to make sure that it works, that it provides a service.
PW: Because if it doesn’t, if it loses customers, if it loses market share, you’ve got a lot of jobs on the line right there. You’ve got a lot of CEOs. You’ve got a lot of people on the board of directors. Their job is on the line if this company does not succeed.
How many people are working on your behalf? Now, the reality is, do you have direct control over them? No, you don’t.
But recognize that we’re all in this together. We want to make this thing work. That’s powerful because you’re owning that company, you’re an investor in that, you get the profits of that company, and you’ve got tens of thousands of companies. Millions of people are all around the world working on your behalf.
JW: That’s why I’m always long-term optimistic on markets. I know they’re going to fluctuate, but it’s incentives. People respond to incentives individually and widely as a group.
All those CEOs, all those board members, are paid very well. They want to keep those jobs. They have nice benefits.
PW: For sure.
JW: And the people that are working below them would like to have their job, so they want to work hard and they want to move up. The more they can make those companies successful, then that increases their chances.
All that does is focus. Okay, the company wants to increase earnings, increase earnings, and of course, ultimately, that’s what stock prices follow over time. It’s not a perfect correlation, but it’s a really, really good one, which makes absolute sense. If the company’s making more money, then you have more earnings, the company’s worth more, and the stock price is going to go up.
PW: That’s part of what makes me feel so confident regarding investing. I make sure you do that.
PW: People will say, “Well, I can’t take the risk. I don’t like that,” and then they get sucked in by insurance products and things like that, the annuity products that I see all the time and I rail against. I say, “Well, if the calamity that you’re fearing happens, will that insurance company survive?”
I was actually looking at somebody, an accountant, CPA, brought a client in and said, “Hey, can you talk to this person?” I was looking at the contracts.
She had been sold several annuity contracts, and I’m looking at it and going, “Well, if this is what you put in, this is what your account value is. This is your cash value of your account. If you look at what it’s actually worth, here it is.” But down below was a much, much higher number.
I said, “That is how the insurance company keeps people thinking that they’re doing better than they are, because they put the fictitious account number so often right below.” This is almost always what I see, so I said so often, because maybe some insurance company doesn’t do that. If there is, I’m not aware of it.
But they’ll have this higher number down there, so people look and they go, “Oh, look how much money I’ve got.” And I’m like, “No, you don’t. This is how much money you’ve got. This is the liquidation value,” and they’re like, “Ugh, yeah.”
JW: I literally had that conversation this week in terms of explaining that phantom balance to somebody because they were saying, “Well, yeah, this guy was going to guarantee me 5% in this annuity or something like that,” and I said, “That’s not money you can withdraw.”
PW: Right. Right.
JW: I explained the difference between the actual value of the contract and the phantom balance and how that worked and that you couldn’t withdraw the phantom balance. You could only withdraw the market value, and that, on top of the surrender charges, turned out to be not a really good deal.
But one thing I wanted to make a point on, too, is when people talk about, “I can’t take the risk,” well, they are taking risks. They’re just exchanging one risk for another. They’re exchanging the market risk and the short term, which is a short-term risk.
PW: Yeah, it’s a huge deal.
PW: Speaking of that, we’re talking about homes and we’re talking about the value of homes and just the fact that a lot of people can’t afford that. Well, why is it that they can’t afford that?
Well, one of the things that I was talking to Evan about a couple of weeks ago was this very thing about what’s happening, what’s going on, and I said, “Hey, if we look back at the house that my wife and I first bought, if you were able to buy that house right now, this is what the payment would actually be.”
Based on the value, I think it was a Zillow value. It was out there that they had the value of the house, and I said, “Hey, if you look at that payment on your mortgage, if you actually bought the house, that payment for the mortgage plus the taxes was actually less than what a lot of people are spending on apartments in middle Tennessee.”
I said, “So the reality of it is that you actually can, but the problem we were talking about is the size of the houses and that people are wanting.”
Actually, this guy did a twist on this, and I want to play this little clip for you because I hadn’t even thought about this, but this is something I saw that happened in California. I’ve talked about this happening in California, but according to this guy, it’s happening everywhere. Check out the reason that people aren’t able to afford homes right now.
Aaron Scott: I was talking to a home buyer the other day, young dude, super frustrated, swears that starter homes are extinct because Wall Street bought them all.
PW: There is something to that, where Wall Street, the real estate investment trust, they’ll have programs out there where they come in and they buy houses, buy smaller houses, and they’re renting them out. This is what you’re finding, private equity type of companies that are going in and doing this type of thing. That’s what he’s referring to right there. But he goes on, he says, “Wait a minute, there’s a little bit more to the story,” and here’s what he says.
AS: Said it with the same confidence that people use when blaming aliens for crop circles. So I ask them, “What if the homes didn’t disappear? What if we stopped allowing them to exist?” Here’s the part that no one likes. In 1950, a home cost three times your income.
PW: Okay. Those of you who know me know that I grew up in upstate New York in a little town. It was outside, disconnected in New York, and we had this little town called Scotia. In Scotia, you had tons of little houses right next to each other. I mean, think of, you remember the show, Jim, “All in the Family”?
JW: Oh, of course.
PW: Okay, it looked like that. No kidding, it looked just like that. It was that kind of feel.
PW: He says, “What your house costs compared to income back then …” I’m going to rewind that just so you hear that one more time.
AS: Here’s the part that no one likes. In 1950, a home cost three times your income. Today, it’s seven. It’s 11 in California.
It sounds terrifying until you take a closer look. A 1950 starter home was around 983 square feet, had two beds, one bath, tiny kitchen.
PW: Now, how many houses do you see on the market of that size?
JW: Not many.
PW: Two bedrooms.
JW: Yeah. The ones you do see like that are like in the middle of the city that have been there for years.
PW: Exactly. Exactly. Number one, I mean, 900-something square feet, that’s not too far off of what I talked about a couple of weeks ago. That’s the size of my wife and I’s, our first home, but that is what it was.
AS: Great place to start a life, but that was it. Today’s entry-level home is over 2,500 square feet, vaulted ceilings, walk-in everything. It’s luxury dressed up as the minimum.
PW: I remember my wife and I were looking for a next house, and we were just going all over the place. That was our pastime. We had a good time.
We’d be going from one place to another on the weekends. We’d go to open houses and all that type of thing.
I remember this one little thing that they had, that they had this one set of houses that was north of Goodlettsville. I’m sure it’s still there, unless the houses have fallen down. I don’t think they’ve fallen down, but cheap, cheap, cheap.
I mean, they really were, but they were cool. They were kind of neat, but they were cheaply built. I thought, When’s the last time we saw something like that being built? I just don’t see it anywhere.
JW: No, a starter home.
PW: Oh, go ahead.
JW: No, I was going to say when you see stuff that size, you don’t see single-family homes. What you see are multifamily units. There’s lots of money going into those, but they may or may not be for purchase.
They may be for lease. You might be able to buy the condo and stuff like that, but for that market, it’s all in that bundled approach as opposed to individual family homes.
PW: Sure. And Jim, when I first moved to Nashville, that was the thing that everybody was trying to get the heck rid of. They couldn’t get out of condos fast enough around here.
Let’s see, when was that? It was probably the late ’80s. I think it was about the late ’80s when we had the real estate crash that had happened and people could not get out of those multi-unit housing, those condos, and basically what they were. People couldn’t get out of them fast enough.
It’s so interesting. It’s all you see right now. History doesn’t repeat, but it rhymes for sure.
JW: Right. Right. Well, yeah, you look at all those cranes in downtown Nashville, and some of them are office buildings, but a lot of these are these huge apartment condo complexes.
PW: Oh, gosh. Yeah. Yeah.
PW: So he continues on.
AS: The starter home wasn’t stolen. We supersized it out of existence. Why not build the smaller ones again?
We can’t. Zoning, regulations, city rules, a whole maze of not allowed.
PW: I think that is such a good point. I don’t know that there’s a solution that I’m going to propose here or anything like that. I mean, you could do what they did back in the ’80s before they lost popularity, but maybe that’s what makes it happen again, but the condos and those types of things and the idea of trying to get something a little bit smaller.
I had a friend of mine out in Arizona, and one of the things that he did was he wanted desperately to move up with his family. He wanted to get out of living in this little dingy apartment that he was in, and he ended up buying a piece of land fairly inexpensively.
It was really interesting, because his family put a trailer on it. Really inexpensive trailer for the short run. They lived in there for probably a couple years maybe, I want to tell you, and then they ended up building a house.
But that’s how they did it. That’s how they got out. Often, it’s just, “Okay, how can we do this?” And getting creative.
JW: Well, it’s just providing the right incentives, right?
PW: Yeah.
JW: If you can position it somewhere where the companies are going to provide this housing and they’re going to make money doing it and there’s going to be a market and the neighborhood’s going to be successful, if you can incentivize all those things, then it’s going to happen, but wishing for it isn’t going to happen. The guy mentioned regulations and things like that.
PW: Yeah, that’s it. That’s it. I think that’s key.
JW: That’s such a boot upon the neck of people that would ever want to do this. People come and say, “Oh, yeah, I want to build this and this and this.” Well, no, because this regulation, this regulation, environmental reports, a lot of yada, yada.
Now, you don’t want to let people come in and trash the countryside, et cetera, but so much is unnecessary. It’s just mind-boggling. If they really want stuff like that to change, you’ve got to incentivize the behavior that you want to happen.
PW: I think you have to help people become aware of what’s going on. I think, more than anything, the reason for me even talking about this right now is just to create awareness, because I think this is a really good point that he’s making.
I remember studying economics and studying the economics of different areas around the world and around the country especially and finding that most of the problems that we were dealing with was zoning just going crazy in restrictive type of zoning where you would say, “You can’t have that. You can’t have that, not my backyard, and you can’t have that.”
And then what ended up happening is a few people really benefited from it, but a lot of people ended up getting hurt by it. I think just awareness of the public that this is what’s going on, I think, is critical.
JW: I was just going to add —
PW: Yeah, go ahead.
JW: — just on the whole luxury thing, too. Even when I’m talking about these apartments that they’re building, they’re building lots of condos and things like that, but they’re luxury, too, right?
PW: True. That’s true.
JW: They’re not necessarily starter apartments for somebody who just graduated college and wants to start a family young or something like that. Again, they’re three-bedroom, you got the best views, and you got all these amenities, which is nice if you can afford it, but there’s not a lot of people that can just jump right into there, making whatever they make right out of school.
PW: I think that’s exactly right, Jim. From my standpoint, just recognizing that if you want to do very well, sometimes you just live less at a lower level than your friends.
Matter of fact, there’s a really interesting thing about doctors and how miserable doctors are, even though they have these huge high incomes, but they’re all in competition with each other to look more successful than each other. That can backfire on you in a big way.
If you look at regular types of jobs, people that are dry cleaners, for example, people that run dry cleaning establishments, they’ve shown forever that those people are much more financially stable, quite often because they don’t have to look the part.
PW: All right, we’re back here. “The Investor Coaching Show,” Paul Winkler, talking money and investing along with Jim Wood. Just because I can keep this fairly short, I want to continue on that thing about starter homes, because there was a second opinion, and I’d be real curious to hear what your thoughts are on this, Jim.
Why is it that people are having a hard time with buying their first homes, getting into their first residence? There’s another take. This is the idea we just covered, which is zoning and regulations and restrictions are making starter homes illegal. I mean, the idea that people aren’t building small homes.
I don’t know how much of that is the case outside of the bigger cities, but I do find that, in the bigger cities, a lot of times you’ll find that those restrictions that can be so high and the hurdles are so high with impact taxes and those types of things that you just can’t build something really small.
That’s one of the things I’m hopeful for, is that, as time goes on, transportation will be better and it’ll be easier to get into a city quickly. Flying cars, I’m holding out for that, Jim. That’s going to be my thing.
JW: I was thinking Waymos and things like that, self-driving.
PW: That’s a good point. That’s a good point.
JW: Stuff like that, you could at least get in your car. Even if it’s a 45-minute drive, you can use that time sitting in the backseat, reading, napping if you want to, whatever. It just shows up, and you get out, as opposed to the white-knuckle people cutting you off left and right, fighting every day; that is just soul draining.
PW: Well, yeah, it just reminds me of a conversation with a guy this week and he was talking about just going and just saying, “I cannot do this anymore.” He has these places that he has to go and it’s an hour, two hours on the road every single day, just getting through Nashville traffic. He’s like, “I can’t do it anymore.”
And I thought, I can imagine as you get up there in age, you’re just like, “I can’t do this. I don’t want to do this anymore. I don’t have to do it anymore. I won’t do it anymore.”
But what if you’d be able to use that time for something else? Read the paper, have breakfast as your car’s driving you in. Who knows where that’s going to go?
Out in Phoenix, when I go out there, I see those things all the time. It just blows my mind. Driving off from the airport, you go from the airport in Phoenix, and they are everywhere, those little white cars with cameras all over the place.
I see more of them almost than I do regular vehicles. It’s crazy. It is something that’s coming soon to a neighborhood near you.
PW: But anyway, this guy’s had a different take. He said, “Well, here’s what’s going on, why people can’t afford homes.” I want to hear what your thoughts are on it. Let’s just check this out.
Mike Emanuel: Buying a home, it’s likely something many of you watching have done, but others are still dreaming of accomplishing that. But new data shows that dream could take a bit longer to achieve as the median age for American home buyers is going up. Let’s bring in Ari Rastegar, founder and CEO of Rastegar Capital joins me now.
PW: Jim and I talked about that. We were talking about the first-time home buyers a couple decades ago. They were in their 20s, and now it’s much higher. You’re getting up into your 40s before you have a first-time home buyer, and the second time they buy a home is, oh, gosh. It was like late 50s, 60s, something like that, second-time home buyer. But anyway, that’s what he’s talking about here.
ME: Ari, welcome.
Ari Rastegar: Thanks, Mike. How are you doing?
ME: Great. Great. The Fed chairman says we have a housing shortage in this country. You are an industry expert. What about that?
AR: Well, we certainly have a shortage. There’s close to 6 million houses that we are short overall and that’s definitely an issue. The prices have certainly grown faster than the wages have, which clearly causes a problem.
PW: And why? And you may say, “Oh, it’s just prices have gone. Inflation’s been crazy.”
You can debate that, and I think he’s saying, “Eh, that’s not necessarily it.” But I think it is a big part of it. He’s discounting it, but he adds something to it.
ME: The age of first-time buyers is now 40 years old. Is that because it is so expensive to make the jump from renting to ownership?
AR: Well, Mike, I like to look at it a little bit different way. The values of the boomers were to save money, be very practical, very pragmatic. This younger generation sees the world through a very different lens quite literally. Their deposits into the savings account, so to speak, or their 401(k)s has gone into upgrading their cameras on their phones because they value experience over buying their first house.
PW:
JW: Well, it’s one of those things where these all don’t have to be false. I think there’s truth in everything. As they’re saying, I think the whole idea of bloat, of bigger houses and stuff, there’s absolute truth to that.
There’s truth to that, that attitudes have certainly changed. From a family standpoint, I mean, my parents got married at 21 and 19, which at the time wasn’t unusual. It’s very unusual now, but it happens.
PW: That’s a good point, too. Yeah, that’s a really good point.
JW: So they got married young and then they looked for that starter home, which was probably three times what my dad made as a sheet metal worker.
PW: No, that’s a really good point. I think, on top of that, too, if you’re looking around and you’re going $400,000, $500,000 for a home, why even bother?
JW: Yeah.
PW: There may be some of that as well. That may be the reason that they’re not saving, because it’s almost like he’s couching it as they’re irresponsible, they’re not putting money away, they’re just blowing it on their phone and all that kind of thing. I think there’s always more to it than that, but I think that’s an interesting point about what’s happening.
AR: Clearly the affordability is an issue, but I think this value shift is profound where, when it came time to maybe buy that first house, they were thinking about the trips they were going to go on, where their assets have accumulated in their photo library and their experiences socially, more so than thinking about the house, because for them the home was in the heart more so than the bricks.
PW: There’s a point to be made there. When he talks about the whole idea of experience, there’s pretty decent research that shows that people appreciate experiences far more than they appreciate stuff.
When you’re going to buy a car, for example, your anticipation, you’re like, “Oh, man, I just want to get this. I want to get this.” And you’re really fired up and it’s taken too long to get it and you’re trying to haggle with the salesperson regarding it and there’s stress that’s going on.
And then all of a sudden, you would get this thing and then all you get into comparative analysis, you look around, other people have nicer cars than you do, and you get frustrated. It breaks down or somebody dings it in the parking lot and now you got a car with a dent in it. There’s all kinds of frustration with stuff.
Whereas with experience, you went on a trip to Hawaii, another person takes a trip to California or another person takes a trip over to Florida or a person takes a trip over to Europe or whatever and people just compare. Some person goes camping. It doesn’t cost hardly anything.
But what ends up happening is you compare your experiences and you don’t really say, “Hey, your experience was better than mine.” You don’t put yourselves on a ranking scale and say, “Well, your vacation was way better than mine.” It doesn’t get into a competition.
Yeah, Jim.
JW: I guess one of the problems there is they get impatient for those experiences, because there are also experiences that are wrapped up in the basics of buying a home, having a family, and that. Yeah, you’re not traveling to Italy every year for a couple of weeks or doing any of that, but you’re having all the experiences of raising kids and sending them to school and teaching and coaching sports. Those are experiences, too, but those aren’t the flashy ones that everybody dreams about right out of college and spending two weeks in Bora Bora or something like that.
PW: Yeah, you’re not going to share your photos of that 10, 20 years down the line going, “Oh, you remember that trip.” Yeah, for sure, there’s definitely that aspect to it.
Anyway, I think that there’s something to that, and I think there’s something to just saying, “Hey, let’s start to work on people’s understanding of what actually is happening. And at a legislative level, I think that there can be something done regarding all of this.”
Anyway, that’s home purchases. Why do people not do it? Sometimes you have to think outside of the box.
Sometimes you have to just go, “Hey, you know what? What do we have to do to get where we want to go,” and start putting money aside. That’s where planning comes in.
A lot of times, there are things that you can do you don’t realize you can do. There are things that you can accomplish you don’t even know because you don’t know what you don’t know. And I think that’s where financial planning can really be helpful in how we reach the goal that we want to reach.
Advisory services offered through Paul Winkler, Inc an SEC registered investment advisor. The opinions voiced and information provided in this material are for general informational purposes only and not intended to provide specific advice or recommendations for any individual. To determine what investments are appropriate for you, please consult with a financial advisor. PWI does not provide tax or legal advice. Please consult your tax or legal advisor regarding your particular situation.
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