Episodes

  • When Economic Adjustments Can Mislead You

    When Economic Adjustments Can Mislead You
    Jun 30 2025

    On today’s show we are taking a look at two different measurements of the exact same thing. Imagine for a moment that you wanted to cut a piece of wood. You take out your trusty tape measure and measure the distance you think you need. But then along comes an economist who says, “Oh no. You’re not going to use that simple tape measure are you? That will only give you a nominal measurement. There are a bunch of adjustments to be made in order to get the real measurement.”

    This is a joke of course, but often jokes mirror reality.

    The Case-Shiller real estate market index reports both nominal (non-seasonally adjusted) and seasonally adjusted data.

    So when is it appropriate to use the seasonally adjusted number?

    Seasonally Adjusted data is best for analyzing short-term trends, like month-over-month changes, because it removes the noise of seasonality.

    Non Seasonally Adjusted data is better for year-over-year comparisons, since seasonal patterns occur in the same month each year.

    For example, I would personally compare June of 2025 against June of 2024. That’s a valid comparison for the same point in the seasonal cycle on a year over year basis. For that measurement I would not use seasonally adjusted data. If I wanted to compare June to January which are at different points in the annual cycle, I might use the seasonally adjusted data. But because the seasonal variations are so large I personally would not even perform that comparison even with the seasonal adjustments. I don’t know what conclusions I would draw from the data.

    I personally don’t like to mess around with adjustments at all. I would prefer to compare this January against January the year before, and then February against the same month the year before and so on. That way there is no seasonal adjustment required for the exact same period one year earlier. It’s a like for like comparison.

    ---------------

    **Real Estate Espresso Podcast:**
    Spotify: [The Real Estate Espresso Podcast](https://open.spotify.com/show/3GvtwRmTq4r3es8cbw8jW0?si=c75ea506a6694ef1)
    iTunes: [The Real Estate Espresso Podcast](https://podcasts.apple.com/ca/podcast/the-real-estate-espresso-podcast/id1340482613)
    Website: [www.victorjm.com](http://www.victorjm.com)
    LinkedIn: [Victor Menasce](http://www.linkedin.com/in/vmenasce)
    YouTube: [The Real Estate Espresso Podcast](http://www.youtube.com/@victorjmenasce6734)
    Facebook: [www.facebook.com/realestateespresso](http://www.facebook.com/realestateespresso)
    Email: [podcast@victorjm.com](mailto:podcast@victorjm.com)
    **Y Street Capital:**
    Website: [www.ystreetcapital.com](http://www.ystreetcapital.com)
    Facebook: [www.facebook.com/YStreetCapital](https://www.facebook.com/YStreetCapital)
    Instagram: [@ystreetcapital](http://www.instagram.com/ystreetcapital)

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    6 mins
  • Small Bay Industrial

    Small Bay Industrial
    Jun 29 2025

    Today's show is a talk that I gave last month at the Ottawa Real Estate Investors Organization on Small Bay Industrial. This is a segment that our firm is active in and one that we see as having structural shortages in many major markets across North America.

    ------------------

    **Real Estate Espresso Podcast:**
    Spotify: [The Real Estate Espresso Podcast](https://open.spotify.com/show/3GvtwRmTq4r3es8cbw8jW0?si=c75ea506a6694ef1)
    iTunes: [The Real Estate Espresso Podcast](https://podcasts.apple.com/ca/podcast/the-real-estate-espresso-podcast/id1340482613)
    Website: [www.victorjm.com](http://www.victorjm.com)
    LinkedIn: [Victor Menasce](http://www.linkedin.com/in/vmenasce)
    YouTube: [The Real Estate Espresso Podcast](http://www.youtube.com/@victorjmenasce6734)
    Facebook: [www.facebook.com/realestateespresso](http://www.facebook.com/realestateespresso)
    Email: [podcast@victorjm.com](mailto:podcast@victorjm.com)
    **Y Street Capital:**
    Website: [www.ystreetcapital.com](http://www.ystreetcapital.com)
    Facebook: [www.facebook.com/YStreetCapital](https://www.facebook.com/YStreetCapital)
    Instagram: [@ystreetcapital](http://www.instagram.com/ystreetcapital)

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    19 mins
  • Scaling Up with Ashley Garner

    Scaling Up with Ashley Garner
    Jun 28 2025

    Ashley Garner is based in Wilmington North Carolina where he runs a growing investment portfolio. He's recently made the jump from 30 unit properties to 200 unit properties and is scaling the business systems to match the new portfolio. Our discussion centers around investment mandate and scaling up. To connect with Ashley, visit https://www.abgmultifamily.com/

    ----------

    **Real Estate Espresso Podcast:**
    Spotify: [The Real Estate Espresso Podcast](https://open.spotify.com/show/3GvtwRmTq4r3es8cbw8jW0?si=c75ea506a6694ef1)
    iTunes: [The Real Estate Espresso Podcast](https://podcasts.apple.com/ca/podcast/the-real-estate-espresso-podcast/id1340482613)
    Website: [www.victorjm.com](http://www.victorjm.com)
    LinkedIn: [Victor Menasce](http://www.linkedin.com/in/vmenasce)
    YouTube: [The Real Estate Espresso Podcast](http://www.youtube.com/@victorjmenasce6734)
    Facebook: [www.facebook.com/realestateespresso](http://www.facebook.com/realestateespresso)
    Email: [podcast@victorjm.com](mailto:podcast@victorjm.com)
    **Y Street Capital:**
    Website: [www.ystreetcapital.com](http://www.ystreetcapital.com)
    Facebook: [www.facebook.com/YStreetCapital](https://www.facebook.com/YStreetCapital)
    Instagram: [@ystreetcapital](http://www.instagram.com/ystreetcapital)

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    11 mins
  • Valuation Distortions

    Valuation Distortions
    Jun 27 2025

    On today’s show we are talking about distorted valuations. When you consider risk, I’m seeing what I can only describe as an atmospheric inversion in today’s markets.

    Wall Street surged toward new record highs on Thursday, as the S&P 500 briefly topped its February 19 closing high of 6,144.15, extending a nearly $10 trillion rally from the brink of a bear market.

    On today’s show I’m going to compare the risk free yield on US Treasuries as a baseline benchmark. In some ways, every other investment could be compared to that benchmark. I’m not going to get into the debate whether the US is going to default on its debt in the next decade or not. For the purpose of today’s discussion let’s take it as a given that the US will meet its debt obligations even if that means expanding the annual deficit and the global debt. We know that will eventually break down, but let’s accept the US Treasury as a foundation for now. The reason I’m proposing that is that the reference for all of these investment returns is the US dollar. If the dollar is in question, then the value of all the other investments that a dollar denominated could be called into question as well. That includes Nvidia, Amazon, Walmart, United Airlines and so on.

    So let’s call the risk free rate of return the yield on the US 10 year treasury. Today the market opened at 4.25%, pretty much in lock step with the Fed Funds rate. So whether you buy a 30 T-bill or a 10 year bond, your risk free rate of return today is at 4.25%.

    The argument is that if another investment is offering a lower yield, then it is somehow a better investment than the risk free rate of return.

    Does that make sense that the S&P 500 index would be more expensive than the risk free rate of return?

    --------------

    **Real Estate Espresso Podcast:**
    Spotify: [The Real Estate Espresso Podcast](https://open.spotify.com/show/3GvtwRmTq4r3es8cbw8jW0?si=c75ea506a6694ef1)
    iTunes: [The Real Estate Espresso Podcast](https://podcasts.apple.com/ca/podcast/the-real-estate-espresso-podcast/id1340482613)
    Website: [www.victorjm.com](http://www.victorjm.com)
    LinkedIn: [Victor Menasce](http://www.linkedin.com/in/vmenasce)
    YouTube: [The Real Estate Espresso Podcast](http://www.youtube.com/@victorjmenasce6734)
    Facebook: [www.facebook.com/realestateespresso](http://www.facebook.com/realestateespresso)
    Email: [podcast@victorjm.com](mailto:podcast@victorjm.com)
    **Y Street Capital:**
    Website: [www.ystreetcapital.com](http://www.ystreetcapital.com)
    Facebook: [www.facebook.com/YStreetCapital](https://www.facebook.com/YStreetCapital)

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    6 mins
  • New HUD Loan Policy Change

    New HUD Loan Policy Change
    Jun 26 2025

    On today’s show we are reporting on a change to financing rules in the US that stand to improve the numbers for multi family apartment projects.


    We are talking about the HUD financing. This is more difficult financing to get than agency debt like Fannie Mae or Freddie Mac. But it is superior financing. There are several different loan types. I’m going to focus on the HUD 223F loan, but everything I’m about to say also applies to the HUD 221D4 which is a construction loan combined with a permanent loan. The reason we are talking about it now is the result of a new policy change is part of a new announcement .

    Under the existing rules you can save up to 0.35% on your annual MIP with the Green MIP Reduction program for HUD 223(f) loans. This also applies to new construction loans like the 221d4.

    The policy change eliminates the distinction for Green loans and normalizes the mortgage insurance premium at 0.25% for all multi-family loans. This reduction in rate means that all other things being equal, you could borrow 4% more in loan principal for the same monthly loan payment.

    -------------

    **Real Estate Espresso Podcast:**
    Spotify: [The Real Estate Espresso Podcast](https://open.spotify.com/show/3GvtwRmTq4r3es8cbw8jW0?si=c75ea506a6694ef1)
    iTunes: [The Real Estate Espresso Podcast](https://podcasts.apple.com/ca/podcast/the-real-estate-espresso-podcast/id1340482613)
    Website: [www.victorjm.com](http://www.victorjm.com)
    LinkedIn: [Victor Menasce](http://www.linkedin.com/in/vmenasce)
    YouTube: [The Real Estate Espresso Podcast](http://www.youtube.com/@victorjmenasce6734)
    Facebook: [www.facebook.com/realestateespresso](http://www.facebook.com/realestateespresso)
    Email: [podcast@victorjm.com](mailto:podcast@victorjm.com)
    **Y Street Capital:**
    Website: [www.ystreetcapital.com](http://www.ystreetcapital.com)
    Facebook: [www.facebook.com/YStreetCapital](https://www.facebook.com/YStreetCapital)
    Instagram: [@ystreetcapital](http://www.instagram.com/ystreetcapital)

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    6 mins
  • Acceleration and the Economy

    Acceleration and the Economy
    Jun 25 2025

    On today’s show we are looking at our human ability to forecast non linear effects and in particular how this relates to economic forecasts. We are accustomed to looking at the world in very linear ways. When we see a car approaching most people are pretty good at estimating whether they have enough time to cross the road as long as the car is travelling at constant speed. But if the car is accelerating, virtually all people have a very hard time assessing whether it is safe to cross the road.

    That’s the difference between a linear and a non linear system. Non linear systems have some form of acceleration.

    We see these types of systems all over the place. Over the short term, if the acceleration is small, people have a tendency to make linear approximations which are accurate enough over the short term.

    The US government makes regular updates to the financial health of the social security system. It’s no secret that the math which funds the social security system is breaking down. When social security was first conceived there were 16 people in the workforce for every one person collecting benefits. Demographics have changed and today there are less than 3 people contributing for every person collecting. Another non-linear effect.

    We know that for the economy to grow, the population needs to grow. Shrinking working population means shrinking economy. This is a non-linear effect.

    The industrial revolution replaced a lot of manual labour with machinery. It didn’t eliminate manual labor for all tasks. For those repetitive tasks that can be easily programmed, machines have replaced humans.

    The theory was that machines could replace manual labor, but not thinking. Humans would continue to be the brains behind the work performed. But we do know that some knowledge work has already been replaced by AI and that proportion is only going to increase. So what happens to the falling demand for employees that have been replaced by AI? What will become of our society? Can we truly forecast the economy that is being impacted by so many non-linear factors?

    ----------

    **Real Estate Espresso Podcast:**
    Spotify: [The Real Estate Espresso Podcast](https://open.spotify.com/show/3GvtwRmTq4r3es8cbw8jW0?si=c75ea506a6694ef1)
    iTunes: [The Real Estate Espresso Podcast](https://podcasts.apple.com/ca/podcast/the-real-estate-espresso-podcast/id1340482613)
    Website: [www.victorjm.com](http://www.victorjm.com)
    LinkedIn: [Victor Menasce](http://www.linkedin.com/in/vmenasce)
    YouTube: [The Real Estate Espresso Podcast](http://www.youtube.com/@victorjmenasce6734)
    Facebook: [www.facebook.com/realestateespresso](http://www.facebook.com/realestateespresso)
    Email: [podcast@victorjm.com](mailto:podcast@victorjm.com)
    **Y Street Capital:**
    Website: [www.ystreetcapital.com](http://www.ystreetcapital.com)
    Facebook: [www.facebook.com/YStreetCapital](https://www.facebook.com/YStreetCapital)
    Instagram: [@ystreetcapital](http://www.instagram.com/ystreetcapital)

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    6 mins
  • Lower Risk Outside The US?

    Lower Risk Outside The US?
    Jun 24 2025
    Visit Y Street Capital to learn more about our projects. The conventional wisdom is that when the value of a country'scurrency falls relative to its trading partners, its exports become more competitive in the global market. It's no secret that the Trump Administration is aiming to bring more manufacturing back to the United States.Global flows of capital have changed since the start of the year. While the administration wishes to bring increasing levels of capital investment to the United States many of the policies are in fact having the opposite effect. President Trump has stated publicly that he wishes the US dollar to fall compared with other currencies including the Japanese Yen, the Euro, the Chinese Yuan and the Canadian Dollar.An increasing number of investors are looking for a safe haven for their capital. The US dollar has fallen by 10% since the beginning of the year against most of the major currencies. Indications are that it is forecast to fall even further when measured against other major currencies. We think that real estate investments in Canada represent a better risk adjusted proposition right now. This is based on the following observations:1) The slowdown in new construction that we have seen across the US is also present in Canada. This means that labor rates in Canada for new construction have moderated and we are seeing extremely competitive bids for new work. 2) Immigration to the US is down significantly since the start of the year and demand for new housing will decline as a result. The US has pretty much closed the door refugee claimants. This includes countries like Afghanistan where many US allies are stranded and have no path to enter the US. 3) Immigration to Canada remains in extremely high demand. The Canadian government has reduced its immigration targets slightly, but the numbers remain extremely high especially when compared to the US as a percentage of the population. 4) Interest rates in Canada are much lower for borrowing. The 5 year Canada mortgage bond is trading around 3.1% which means that a new construction and permanent financing loan could price below 4%. Rates are not that low in the US. 5) Canada is not waging a trade war against the rest of the world. While prices for certain construction commodities like electrical equipment and air conditioners will certainly be impacted by tariffs in the US, we are not seeing the same impact in Canada. Many manufacturers have operations in North America including Mexico. These goods can flow into Canada free of any tariffs under USMCA. 6) Even with new apartment supply having entered the market, vacancy rates in most Canadian cities are far below comparable US markets. 7) If the US dollar falls further as we see the Trump administration wishing, then any investment outside the US goes up in value on a relative basis. Investing is not the same as speculating on foreign exchange rates. That alone should not be a reason for investing outside the US. It’s just one of many factors to consider when looking at aggregate probabilities.When we put all of these factors together, we see a compelling case for investing in Canada, even for US investors. ---------------**Real Estate Espresso Podcast:** Spotify: [The Real Estate Espresso Podcast](https://open.spotify.com/show/3GvtwRmTq4r3es8cbw8jW0?si=c75ea506a6694ef1) iTunes: [The Real Estate Espresso Podcast](https://podcasts.apple.com/ca/podcast/the-real-estate-espresso-podcast/id1340482613) Website: [www.victorjm.com](http://www.victorjm.com) LinkedIn: [Victor Menasce](http://www.linkedin.com/in/vmenasce) Facebook: [www.facebook.com/realestateespresso](http://www.facebook.com/realestateespresso) Email: [podcast@victorjm.com](mailto:podcast@victorjm.com) Facebook: [www.facebook.com/YStreetCapital](https://www.facebook.com/YStreetCapital)
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    5 mins
  • What To Do When Loans Reset At Higher Rates?

    What To Do When Loans Reset At Higher Rates?
    Jun 23 2025

    The long awaited pull back in pricing for apartments is here. These properties don’t need to necessarily be poorly performing. It’s the properties that were financed with bank debt from small local and regional banks. These smaller banks typically offered loans with a 20 year amortization period and if the loan was written five years ago, the 10 year Treasury yields were pretty low at 0.7%. The loan written five years ago would have been priced in the mid 4’s. Oh, and here’s the important part. It would have been written with a five year term. That means the loan would need to be renewed at current rates in five years and that five year period is up now.

    The borrower has the option to renew with the lender at the current rate with a new loan. But at today’s higher rates, even if the property is performing well, the borrower is likely to be forced to bring additional cash to the table.

    The situation can be improved by moving out of the local bank financing into agency debt with a longer amortization period. Instead of a 20 year loan, maybe a 25 or 30 year loan will reduce the loan payment enough to make the numbers a little more palatable.

    --------------

    **Real Estate Espresso Podcast:**
    Spotify: [The Real Estate Espresso Podcast](https://open.spotify.com/show/3GvtwRmTq4r3es8cbw8jW0?si=c75ea506a6694ef1)
    iTunes: [The Real Estate Espresso Podcast](https://podcasts.apple.com/ca/podcast/the-real-estate-espresso-podcast/id1340482613)
    Website: [www.victorjm.com](http://www.victorjm.com)
    LinkedIn: [Victor Menasce](http://www.linkedin.com/in/vmenasce)
    YouTube: [The Real Estate Espresso Podcast](http://www.youtube.com/@victorjmenasce6734)
    Facebook: [www.facebook.com/realestateespresso](http://www.facebook.com/realestateespresso)
    Email: [podcast@victorjm.com](mailto:podcast@victorjm.com)
    **Y Street Capital:**
    Website: [www.ystreetcapital.com](http://www.ystreetcapital.com)
    Facebook: [www.facebook.com/YStreetCapital](https://www.facebook.com/YStreetCapital)
    Instagram: [@ystreetcapital](http://www.instagram.com/ystreetcapital)

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    5 mins