Podcast Archives - Jay Garvens

Much as I enjoy talking about the real estate and mortgage industries, I find it refreshing to dedicate the occasional show to other important topics. This week, the subject was veterans and their stories. If you’ve ever met a veteran, or a relative of a veteran, then you’ve no doubt witnessed the passion and reverence with which people talk about them. Every veteran has a story, and it’s a true blessing to share these stories with you.

During my time on the air, I’ve made constant reference and allusion to my time in the military. The first hour of this show was the first time I’ve gone into detail: How I joined the military during college, where I went afterwards, who got me there, and how I ultimately ended up in Colorado Springs. This was a life-changing experience, and I met countless life-changing people throughout it. You can listen to the full narrative in the archive for all the delightful details. But so far as this post is concerned, the details aren’t so important. What’s important is the significant impact the military made on my life for the better, and how there are literally tens of millions of similar stories out there.

At Garvens Mortgage Group, my mortgage company, several of the loan officers and managers have similar stories—similar, that is, in how the military changed their lives and contributed powerfully to who they are as people today. Whether a West Point graduate or Air Force electronics specialist, a submarine captain in the Navy or an infantry soldier in the Army, each has a powerful story to share, and often can’t help sharing the equally powerful stories of other men and women with whom they served.

Similarly, with our company’s strong focus on the VA loan program, we meet hundreds of veterans each year—again, each with fascinating stories to tell. Some are still active, others retired. We have met veterans from each major conflict since the Korean War. But no matter their current status, their length of service, or their time out of the service, each brings the same wild-eyed passion to their stories, and each will go on for hours if you let them—which, during an application, we typically do.

If you have a story of your own, or stories of your spouse’s/children’s/siblings’ that you’re eager to share, I am eager to hear them. Please don’t hesitate to call into the show or email and share these stories. And, truly, write these stories down. Share them with family and friends. Preserve them for posterity. For the vast majority of people, the legacy they leave is in their stories. If they aren’t preserved in writing, they will be lost forever.

5-24-14 Story of a Vet

Impulse buys are seldom reasonable, but most are at least excusable. The World’s First Flying Tricycle, for example, has a multitude of practical uses. To impulsively buy a house, however, is neither reasonable nor excusable. Many folks dream of owning a home, so it’s understandable when they become exuberant over mortgage products that may—finally!—put that elusive dream within reach. But a home is not a flying tricycle. It is a serious financial commitment that should be purchased only after careful planning and preparation. But how do you know if you’re ready to purchase a home? Where do you start? What do you look for? That’s what today’s show is about.

There is no shortage of real estate agents and lenders who will push clients into homes and mortgage products they can’t afford. And, truth be told, there is no shortage of buyers who will delude themselves into thinking they can afford whatever they want, or whatever they’re being sold. Real estate agents work on commission, and many encourage their clients to buy as much house as they can afford—if not more. They understand there are creative financing options out there to get practically anyone into a home whether or not they can afford it. This is what ultimately caused the housing crisis of 2007.

This is why it’s imperative that any prospective homebuyer has the prudence to plan their housing budget in advance, and the discipline to stick with it. Before you even begin looking at homes, you should work out your budget and settle on a housing expensive figure that you can comfortably afford—remembering that the mortgage is only part of the expense. There are also property taxes, homeowners insurance, and perhaps even flood insurance and homeowners association dues. Once you figure out a comfortable monthly housing expense, you can determine your price range and begin shopping.

From here, the question becomes: What am I looking for? Oftentimes, when people dream of homeownership, they already have dream home in mind.  Not to throw a wet blanket on your dreams, but…sssschlplop. (That’s the sound of a wet blanket.) If you’re a first-time homebuyer, your first house will not be the house of your dreams—unless your dream home is a 2-1 fixer-upper in an “up and coming neighborhood.” Then you’re in luck. Everyone else should adjust their dreams to be far more practical. Newlyweds don’t need a four-bed, three-bath McMansion. Empty-nesters don’t need a larger home with fewer rooms just because the kids are gone; more likely, they’re better off with a smaller home and fewer rooms. As with cars and clothes and televisions, you need to prioritize and realistically assess features: which ones you’ll actually use versus which ones you may use versus which ones you’d like to have but honestly won’t ever use.

On TV and the radio, you’ve no doubt heard news stories and advertisements about the red-hot state of the local real estate market. That’s mostly hype…mostly. Contrary to the news and advertisements, there is no need to act right now. Prices may appreciate between now and when you’re finally ready to purchase, but the appreciate won’t affect how much of a house you can buy enough to warrant making a hasty decision. Hesitating to purchase might cause disappointment if you miss out on a great house. But rushing to purchase can, and likely will, cause disappointment, regret, remorse, and a lot of financial trouble.

5-17-14 When and What? Buying a House

Did you call your mother? Did she remark that she can’t believe it’s snowing in Colorado on Mother’s Day? “Easter, sure, but Mother’s Day?” This seems to be the template for most conversations with mothers: 50% things she can’t believe; 40% advice; 10% miscellany. It’s the 40% we’re concerned with today. You should never make a major decision without consulting your mother, and since home-buying is one of the biggest decisions you’ll make, you really should take the time to ask her opinion—or at least stop and consider what she might say.

Now, although I can to tell the difference between mauve and medium lavender, I’m not a mother. I am confident, however, that I can channel my own mother. Motherly advice is sensible, prudent, and practical—exactly the right approach when buying a home.

Her first piece of advice would be: stay within your means! You’re finally old enough to know the value of a dollar, so you should know better than to buy a house you can’t afford. Before you even start looking for a home, work up a budget and settle on a firm amount that you’re comfortable paying each month. This is, after all, a liability you will have for 15-30 years. You should consider the principal and interest, taxes, insurance, and factor in a cushion for unforeseen repairs. The mortgage may be the most expensive part of homeownership, but it’s not the only expense!

Next, prepare for homeownership! Remember that puppy you begged your mother for? The one you promised you would feed and bathe and care for? Well, a house is not a puppy; your mother won’t take over when you lose interest. You need to prepare for the responsibility of homeownership. This means resolving any debt, delinquency, or credit issues. It means saving for a down payment. It means having a reserve in the bank of at least six months that will cover your housing and living expenses. There is nothing more damaging to your credit than a bankruptcy and foreclosure. And 9 times out of 10, the steps you take before you acquire a mortgage will determine whether you foreclose in difficult times.

At some point, your mother might have advised you to keep your friends close. This is especially true in the home-buying process! You need friends—people you trust—to guide you through the various parts of the process. From a reputable real estate agent to a sensible insurance agent to, finally, an honest mortgage broker, you simple must build trusting relationships with each person in the process. Real estate, insurance, and mortgages are too complex for most people to grasp fully. If someone wants to pull a fast one, they probably can. It’s imperative that you find someone who has your interests in mind—someone whose primary business goal is ensuring their clients are in a better place after the transaction than they were before.

The home-buying season is starting to kick into high gear. In the mad dash to not only find a home but also put in a successful offer, it’s easy to lose your senses. Whether you’re currently shopping or just deciding whether homeownership is for you, it helps to take a moment and consider what advice your mother would give you. Or, even better, give her a call. She may give you a list of 83 reasons you’re not ready to own a home. Or she may encourage you and offer some down-payment assistance. Odds are, she knows what’s best for you and will push you in the right direction.

5-10-14 Momma Knows Best

You prepared for it all winter. You dreaded it, accepted it, then bit the bullet and tackled it. You scrubbed the floors, purged the closets, and shook out the rugs. Now—finally!—you feel you’ve finished with Spring cleaning and you can relax until next year. Sorry, but you can’t; you’re not done yet. You left a lot of personal and financial clutter lying around, and now is the time to address it. That is the theme of this week’s show.

Like clutter in upstairs closets or all that Tupperware in the very back of a cabinet, personal clutter is often forgotten because we hide it away rather than dealing with it immediately—as though ignoring it will make it go away. Maybe it’s a small overdue bill or collection. Maybe it’s a credit card that needs paid down. Or maybe it’s a poor mortgage product that’s draining your finances. It may be any number of things, but whatever it is, it needs to be resolved now.

The first step toward resolution is taking inventory of your clutter. I encourage everyone to spend a week or two considering all the clutter in their lives, and then consider ways of getting rid of it. In fact, here’s some hard truth: the most common type of personal clutter is other people. That is, people who are a negative influence in others’ lives. To illustrate this, consider an overweight dog. How did he get that way? He didn’t do this to himself; he doesn’t have thumbs to open the dog food container. Someone gave him the excess food, and since he doesn’t have sufficient willpower to control himself, the negative habits of his owner ultimately has negative effects on him.

This is true of people, too. It’s common to have people in our lives that influence us in the wrong way. Often, it’s lax personal standards that rub off on us. Or maybe they enable us to cut corners or adopt the wrong set of priorities. Sometimes, it’s their negative attitude that becomes contagious and poisons our own outlook. Whatever it is, the best thing to do is clear them out of your life! It is not worth keeping negative, burdensome people in your life.

To offer an example, one of the loan officers at my mortgage company, who is a retired veteran, had a client come in who began speaking disparagingly of the military and veterans. Eventually, the loan officer had had enough and told the client to leave the office and escorted him out of the building. Some may consider this a lost business opportunity, but the emotional and personal cost of dealing with this individual far outweighed any potential pecuniary benefit. The entire company benefited from not having to deal with the negativity that client brought into the office.

Another area that needs constant upkeep, and the occasional deep Spring cleaning, is finances. Even people with great credit profiles allow their financial houses to become a bit messy with a late payment here or an unnecessary expense there. Eventually these little messes compound to become one large, cluttered nightmare. To address this, you need to identify any areas of your finances that need help, prioritize them, and start fixing them. This might mean paying off a small bill now, then another later; or, it might mean restructuring your debt entirely.

Now, in fact, is an ideal time to take drastic action on your debt by using your home as a financial tool. This February marked the first time in 23 months that average home prices actually fell. We had nearly two solid years of increasing home prices, which means most homeowners who were originally unable to refinance their homes now have the equity to do so. Furthermore, the recent run of poor economic news—from anemic GDP growth to a bad jobs report—has kept interest rates low. It seems likely that the Fed will reevaluate, and perhaps even suspend, its policy of tapering to allow the economic to regain its footing.

Spring is here—finally!—and I for one am glad to bid farewell to winter. Economically, this winter was a season of uncertainty. The economy was sputtering, the full effects of the sequester had been realized, new housing starts had plummeting, home purchases evaporated, and yet the Fed continued tapering. Interest rates spiked then receded, and we have been riding a subtle rollercoaster ever since.

Nobody was quite certain what the new year would bring, and many worried that the fourth quarter slowdown in home purchases would continue throughout the first and second quarters of this year. Happily, this is not the case; the real estate sector seems to be rebounding. We began this week’s show with Bill McAfee, owner of Empire Title. As one of Colorado Springs’s most successful title companies, his understanding of the current residential real estate market is second to none.

His experience over the fourth quarter of 2013 and first quarter of 2014 matched what I noticed in my mortgage firm: the late-year interest rate spike sapped consumer confidence and had a detrimental effect on home purchases. Purchases between November and January were only a small fraction of what they had been throughout the prior year. In fact, home listings on the Pike’s Peak MLS were at their lowest level since 2007. Since January, however, listings have rebounded and are presently looking very healthy. Even better is the composition of listings and sales: since January, 66% of sales have been for homes under $250,000.

Throughout 2013, the market was reacting unpredictably to two sources of uncertainty, namely the economy and the Federal Reserve. Nobody could predict the economy’s performance, and nobody could predict the Fed’s reaction to this performance. During the last few quarters, however, the Fed has become much more predictable. No matter the news, they are determined to continue their policy of QE tapering. While interest rates are still fluctuating based on economic indicators, they are not fluctuating as wildly as they had throughout the last year.

Given the market data over the last quarter, I believe we are poised for a purchase boom during the coming spring and summer. And with the strong demand for homes below $250,000, it’s imperative that any prospective homebuyers prepare themselves now. Competition will be fierce in this segment of the real estate market, and any competitive edge could mean the difference between closing on a home or being outbid.

The question of where to start is different for different people. For those who keep their financial house in order, it means finding a real estate agent and mortgage broker. And I can help with both. As a mortgage brokerage, Garvens Mortgage Group has a comprehensive network of fantastic real estate agents. And since most selling agents give preferential treatment to pre-qualified buyers, it’s best to get your financing settled first before going out to shop for a house.

For other buyers who may have been hit hard by the recession and subsequent anemic recovery, the question of where to start may be much earlier in the process. Often it means assessing your current finances and credit. From there, you may be in for a few months of credit repair and belt-tightening; or, you may be able to proceed with a government-backed mortgage product. Regardless, it’s imperative to start this process the moment you think you’re ready to buy a home. Nothing is more frustrating that finding your dream home, only to realize your past credit mistakes or current credit profile make you unable to qualify for financing.

It’s been several years since we had a booming housing market. If this year is different, I expect to see a lot of first-time homebuyers in the market—many of whom do not understand the complexities of the real estate and mortgage industries.

We are now effectively five years into the government’s 2009 stimulus program. How’s that going for us? To save the banking system and revive the economy, the government tried TARP, tax cuts, tax hikes, and stimulus spending. It went nuclear with QE, and then went nuclear again with QE2 and QE3. I suspect this will go on for QE-ternity. All this to say: When it comes to stimulating the economy, the government is all thumbs.

 

The government believes it can achieve prosperity through fiat—that the right combination of regulation, spending, and tax hikes will produce wealth. This is folly. Reallocating resources within an economy does not create wealth; it merely shuffles it around, often less efficiently than when left to the market.

 

Nowhere is this more acutely clear than in the student loan market. The government decided everyone should go to college, and so the government has essentially nationalized the student loan market to make loan terms as attractive as possible. And so students are accumulating tens of thousands, if not hundreds of thousands, of dollars in student loans to acquire worthless degrees.

 

Of all consumer debt—whether for auto loans, consumer credit, mortgages, etc.—the only type of debt that has not declined over the last 10 years is student loan debt. Nationally, student debt is worth over $1 trillion. And it’s rising fast. As more individuals finance their educations with cheap credit and drive up demand, schools raise their tuition. Thus individuals take out more debt and colleges raise tuition more. This is what’s known in the field of economics as a Stand-Back-It’s-Gonna-Blow Death Spiral.

 

If you tour a college campus like UCCS, you’ll notice a flurry of new construction. Universities are booming from this incredible, debt-fueled bubble. Beyond the campus, however, graduates are being crushed by their newly acquired debt. They can no longer afford cars, homes, or furniture; they will be stuck servicing their student loans for decades. The government has, through generous student loan programs, allocated future resources to today’s universities. But the future arrives quickly, and once it does everyone is left wondering: Where’s my wealth?

 

This is the sad state many young adults are finding themselves in. But the consequences of their past, very thoughtless profligacy can be overcome. To start, they can begin prioritizing their purchases. Instead of iPads and sneakers and $100 a month in iTunes purchases, they can direct this money toward a mortgage. “But Jay,” you ask. “What if they can’t afford the down payment on a house?” To which I say: “Ask to borrower it!” There is nothing wrong with accepting down-payment assistance from parents, friends, or relatives. In fact, 1 in 3 home purchases involve borrowed or gifted funds for the down payment.

 

If you’re considering homeownership, now is a perfect time to re-structure your student loan debt and take on a mortgage since interest rates are still historically low. I mentioned this during the radio show, along with a long, but not exhaustive, list of observations about the home-buying process. I encourage everyone to head to the archive and listen to the full list. But for our purposes in this blog post, a few will suffice:

 

* People have a tendency to shop outside their price range. They settle on a budget, then immediately make allowances for homes with new kitchens, whiz-bang gadgets, and extra rooms. Before you start shopping, settle on a budget. Then find a mortgage broker a get pre-qualified according to that budget. That way you won’t be able to exceed your budget.

* Ever notice how the minute you buy a car, you start noticing them everywhere? The same happens when shopping for a home: You start noticing all the a...

2014 promises to be a year of possibilities—a year of change, progress, and success! Or not. It may be another bust. For most, it will surely be another bust. A year is what you make of it. That’s why many Americans—45% to be exact—wisely resolve to make their new year better than the year before. Unfortunately, only 8% of the 45% who make New Years resolutions actually succeed, with 25% quitting within the first week! That’s why we’re focused this week on New Years Resolutions: what they are, why they fail, and how to approach them to ensure success.

Each year, various publications and groups conduct surveys on New Years resolutions. And each year, financial resolutions make up a greater and greater portion. This year, 33% of individuals’ resolutions were finance-related, compared to 36% for weight and 31% for relationships. The top ten resolutions for this year are:

Eat healthier

Drink less

Learn something new

Quit smoking

Create a better balance between work and life

Volunteer more

Save and be more responsible with money

Get more organized

Read more

Finish an unfinished project

And of course I stumbled on some amusing resolutions when researching this show, such as:

To stop procrastinating about procrastinating

To actually laugh out loud when typing “LOL” into a text

To never again take a sleeping pill and laxative at the same time

Even these ridiculous resolutions show a desire to exercise discipline and seek wisdom—although I’m not sure how much wisdom is actually needed to achieve that last one. The point is, silly and trivial resolutions are often the best places to start. Too often, people make unrealistic resolutions, or too many resolutions, and give up entirely when progress proves elusive. It’s better to settle on a handful of small resolutions, achieve them, and then gradually pursue more daunting goals. Instead of resolving to eliminate all your debt, decide instead of eliminate one or two credit card balances.

I was disappointed to see financial responsibility so high on the list of resolutions at number 7. Maybe too few people realize that money problems often contribute to eating worse, drinking more, smoking, and having an unhealthy balance between work and life? And if they’d address number 7 then numbers 1, 2, 4, and 5 would be easier to achieve, if not take care of themselves entirely? Regardless, that is the area I am most familiar with, so I can attest to its importance in most people’s lives. Virtually everyone I meet through this show or through my mortgage company have goals or aspirations that are directly related to getting their finances in order—whether they realize it or not. You would not believe how powerfully financial strain contributes to domestic tension and personal unhappiness.

As you’ve no doubt heard, the first step to recovery is admitting you have a problem. And the best way to admit you have a problem is to have a third party confront you with your spending habits, have you explain yourself, and then scold you like a Catholic nun. The single most important factor in succeeding at your goals and resolutions is to have someone in your life hold you accountable. At Garvens Mortgage Group, we do this all the time. If you want an objective analysis of your spending habits and a sensible plan for rehabilitating your finances, we’re more than happy to assist at no cost. Most commonly, the habits putting a household over the edge are things they have complete control over: the amount of money spent eating out; the super-high car loans; the recurring charges for unused gym memberships or Hulu Plus accounts.

I recently read an article comparing the habits of financially responsible and irresponsible people. The defining difference between these two groups is simply discipline. For example, financially irresponsible people will

We’re four days into the New Year, and by now almost a quarter of individuals who made New Year’s resolutions have abandoned them. The odds on New Year’s resolutions are in nobody’s favor; just 8% will see them through the year. For most resolutions, I can’t offer any more advice than you might find on a motivational poster: “Hang in there, kitty,” and such. But for finance-related resolutions, I’m your go-to source for structuring, pursuing, and achieving your goals.

2013 was a gratifying year for both my radio show and mortgage company. After crunching the numbers, we found that we had helped over 175 households—most of them listeners of the show—achieve their financial goals by saving them over $450 each month through a lower mortgage interest rate and paying off high-interest debt. And we’re determined to help even more people this year.

Of course, the historically low interest rates of 2013 are going away, and I believe rates will climb throughout 2014 to settle above 5% by 2015. So the benefits of refinancing or paying off debt through a cash-out refinance are steadily diminishing. But there is one class of people who can benefit regardless of where interest rates are: Renters. If Ambrose Bierce’s The Devil’s Dictionary had an entry for “renter” it might read: “An individual who works diligently for many years to achieve his landlord’s financial goals.”

A common misconception about renting is that it’s less expensive than owning a home. Poppycock, I say, and balderdash to boot! Renting, on average, is seldom less expensive than owning, and the Bureau of Labor and Statistics has evidence to support this claim. In 2010, the average cost of home ownership was $8,000 a year; for renting, it was $12,800. Worse is the rate at which renting costs are inflating versus ownership costs: in 1986, the average cost of renting was $6,800 in 2010 dollars versus $7,800 for owning. And the same factors contributing to this inflationary trend—absurd zoning laws, a shrinking middle class, stricter lending standards—will only accelerate over the coming decades.

Further, people tend to confuse costs with opportunity costs. An opportunity cost is what you forfeit when you make a choice. The cost of coffee is $1; the opportunity cost is a newspaper or candy bar or any other item you could have gotten with that dollar. Similarly, the cost of renting is, say, $800 a month. The opportunity cost is equity. By renting instead of owning, you are forfeiting the opportunity to build equity. (Owning, too, has opportunity costs: you forfeit the leisure of having someone else mow your lawn, make any repairs, etc. Everything has both a cost and an opportunity cost.)

The confusion between cost and opportunity cost was on display in an article I read from girlsjustwannahavefunds.com. In it, the author listed six reasons why renting is better than owning. They are:

You never truly own your home. Even after your mortgage is paid off, you still have HOA dues and taxes

If you lose your job, you can lose your home

Buying a home locks you in for as long as you’re in the home

You need 20% down to buy a home (This, by the way, is not true.)

Home ownership is no longer an investment

Homeowners are responsible for the cost of repairs and upgrades, while renters aren’t.

You can check out the archived show for my full reaction to this list. Suffice it to say, most of these items ignore the opportunity cost of renting versus owning. Yes, even after you own your home you will still be liable for HOA dues and property taxes. But renters pay HOA dues and property taxes, too; it’s rolled into the rent. As are the costs of repairs and upgrades. But the biggest divergence in opportunity costs is equity. After thirty years of paying either a mortgage or rent, the owner will have possession of a large asset—their home—while the renter won’t. At its worst, homeownership is merely forced savings with an in...

Welcome back to the second part of our two-part series on owning versus renting. On last week’s show, I discussed the immediate and short-term benefits of homeownership, and this week we’ll explore the longer-term benefits. Granted, as a Twitter-loving, text-sending, YouTube-watching culture, we put a low and ever-decreasing premium on long-term planning. We prefer instant gratification over investing. This trend will only widen the chasm between the rich and the poor, and the choices you make today will determine which group you belong to in the future.

You’ll recall from my November 7th show (“The Generational Parade”) that the prosperity of a country is determined primarily by demographic factors. Every generation is a different size, has different values, behaves a certain way, and so on. The size and values of a generation determine economic output, consumption, and savings rates among many other things. For example, the economic boom of the 1980s and 1990s was, essentially, the result of the Baby Boomers reaching their productive peaks. And since then, as the Boomers retire, the diminutive size of Generation X has prevented them from replacing the outgoing Boomers.

The productive output of the Boomers will not be replaced, let alone exceeded, until the maturity of the Millennials beginning around 2020. In that sense, ‘the fuse has been lit,’ which is to say the conditions necessary for an explosion in economic output are in place, and like a lit fuse it cannot be stopped. The Millennials are being educated; they’re starting careers; they’re forming families; and beginning in 2020 they will begin reaching their productive peaks.

One thing Millennials are not doing—at least not yet—is purchasing homes. Among Millennials, there is a slight preference toward renting instead of owning, informed by articles such as the one discussed last week. That article, and last week’s show, focused only on the short-term consequences of renting versus owning, of which there were few, if any, good reasons to rent instead of own.

One confusing aspect of a home is that it can be both a commodity and an investment. Everybody needs a place to live, so like food budgets people consider their monthly rent as a necessary cost of living. It’s a sunk cost, they reason, so there’s little difference in how it’s sunk. But, of course, if you own your home then very little of your monthly housing budget is sunk. Yes, a lot can go to interest if you choose a 30-year mortgage. And, yes, you are responsible for repair and upgrade costs to your residence. But these costs are baked into rent, too. The cost of your landlord’s mortgage is cooked into cost of rent. He is making his money back unless he’s a fool. And the odds of finding a foolish landlord are narrow. Unscrupulous, sure—but not foolish.

If you choose a 10- or 15-year mortgage, comparatively little of your housing budget will go toward interest. The majority will go to principle. Instead of losing money to your landlord, you are building equity. This, coupled with rising home values, ensures your money is going toward an asset that both holds and increases in value. In ten years, a homeowner will have an asset worth, well, the value of their home; a renter, meanwhile, will have nothing. Once the homeowner owns the property, he can buy a new one and rent out the old. Ten years later, he’ll have two homes—one of which provides a positive cash flow through rents—while the renter still has nothing. And so on. Eventually the homeowner’s rental properties are entirely self-sustaining and contributing to his retirement account.

Such an arrangement requires years of planning and execution. That’s why it’s imperative to begin as soon as possible. This year is especially great to begin since it will probably be the last year in which owning a home is less expensive than renting in the short-term—that is, your monthly mortgage payment is less than rent.

This was an exciting week for the show, as it was our first show in the new 11:00 AM to 1:00 PM timeslot. It’s a blessing to not only spend an extra hour with my listeners but also reach an entirely new audience in this timeslot. It’s also providing practice in hosting a longer-format show, which will be invaluable when the show moves to a live call-in format in May, which is something I and my production staff are incredibly excited about.

So although we’re looking forward, and I was tempted to just hit the ground running by picking up this week where the 8:00 AM show left off last week, I figured our new listeners would benefit if I instead spent this show trying to condense the threads and themes of all past shows into one comprehensive narrative. This week’s show, then, is essentially The Jay Garvens Show’s manifesto. It blends twenty years of studying mortgages, real estate, economics, and demographics into one worldview. Ideally, what you learn in this week’s show—even if you’re a brand new listener—will inform anything you might hear on future shows.

The keystone of my economic worldview—the sole factor on which all other factors rest—is demographics, which are the observable, quantifiable data of populations. And within the field of demography, this show is concerned principally with age, with generations. Although there are about eight to nine generations in existence in America, I focus mostly on just three: the Baby Boomers, born between 1942-1960 and numbering roughly 60 million; Generation X, born between 1961-1980 and numbering about 40 million; and the Millennials, born between 1980-2000 and numbering around 80 million.

The Boomers and Generation X have determined where we are as a country today, and Generation X and the Millennials will decide where we go in the short- to mid-term future. Each generation is defined not only by its years but also its size, values, culture, etc. Each generation is unique, and all generations coexist in ever-changing combinations of maturity. Our economic prosperity, in fact, is tied to the dominant generation’s maturity.

Going back to Economics 101, the most basic model of an economy is based on supply and demand. Supply and demand are determined by the producers and consumers available within that economy. This means not only the numbers of producers and consumers but also the quality. Quality, for our purposes, mostly means the age composition of the producers and consumers. You see, within a worker’s lifetime, he will go through stages. He will gain education and experience throughout his twenties; he will settle into a career, begin specializing in his field, and start a family throughout his thirties; and he will be at his most productive throughout his forties and fifties up through retirement in his mid-sixties.

The productive capacity of an economy is determined mostly by the number of people in that 40s through 60s demographic. This explains the massive economic expansion of the 1980s through 2000s, during which the first boomers reached their 40s and, by the end, the last boomers reached retirement. The economic downturn since 2006 is the result of there being far too few members of Generation X to replace the productive and consuming capacities of the Boomers. Everything from homes and durable goods to clothes and appliances are seeing depressed demand since there simply are not enough consumers in the relevant categories to promote growth.

This is why I believe our economy won’t pick up until 2020, when the first Millennials reach career maturity. And not only will the economy pick up, it will positively flourish. The Millennials are nearly twice the size of Generation X and will both produce and consume at and above levels unseen since the Boomers reached maturity. This will have profound consequences for all sectors of the economy, from automotive to real estate to health care.

This, in essence,