Why 2025 Will Be A "Rebuilding" Year Beyond Expectations

Much of the uncertainty in America ended with the November 5th election, and we now know who will be running things starting in 2025. But many investors don't realize that our starting point as a nation may be much different than what the media has conveyed to date. In this Mobile Home Park Mastery podcast, we're going to review where things may really stand and what we can expect in the New Year.

What is Mobile Home Park Mastery?

Welcome to the Mobile Home Park Mastery Podcast where you will learn how to identify, evaluate, negotiate, perform due diligence on, finance, turn-around and operate mobile home parks! Your host is Frank Rolfe, the 5th largest mobile home park owner in the United State with his partner Dave Reynolds. Together, they also own and operate Mobile Home University, the leading educational website for both new and experienced mobile home park investors!

Rebuilding in the NFL means that you acknowledge you're doing bad, you do a proper assessment of your weaknesses, set expectations of a low rate of success for a while while you retool, get the new players and coaches in position, you execute on the plan and if it all works out, you come back a better team than you started out. Now we all know that the Make America Great Again slogan reinforces the entire rebuilding process, but our starting spot may be a whole lot lower than most people are currently considering. This is Frank Rolfe, the Mobile Home Park Mastery Podcast, we're gonna talk about why 2025 is gonna be a rebuilding year, but it's gonna be a whole lot tougher I think than most people realize. Now you have to be 40 years old to remember the 2007-2008 Great Recession. You'd have to be 22 years old going into that recession to truly be an adult, hopefully with a job wondering what the world is gonna become of me because things are just so darn bad. So you'd have to be 40 years old. And remember the recession before that, the dot-com bust in 2000, well you'd have to be in your 50s. And then if you remember what was truly a really, really bad recession, the one before that was the 1987-1988 recession, well now we're talking up in the 60s and if you were to recall the godfather of modern history recessions, the 1973-1975 Jimmy Carter era great stagflation mess, well you'd have to be in your 70s.

So really, remembering recessions is an old person's business. And since millennials are the largest part of our population today, then it's clearly understandable why most people don't really have a grasp of what a recession means or really have any memory of them from the past. And that's a problem for society 'cause we always used to have recessions every eight years or so. We have since the founding of America, but the fact we haven't had one, at least according to the government, since the Great Recession of 2007-2008 means people are not experienced with it. They've lost track of how it all works out. Now if you read a lot of economic data, and I read everything I can get a hold of, I'm on a whole bunch of different lists of getting newsletters and things sent to me by email, and I read absolutely all of them, then you would know that right now manufacturing orders, new home starts, the unemployment rate, pretty much every indicator that exists in all of economics is flashing a warning siren of recession.

The only single stat that doesn't scream recession is consumer spending. And let's be honest, when it comes to consumer spending, the average American right now is a little like a drunken sailor. People are spending and spending. They've been on a wild spending spree even during COVID when we didn't know if the world was going to end, at least that's what we were being told. People were still out there spending like crazy and what's fueling a lot of that spending is debt. Credit card uses are at their highest level and I don't know if they've ever been this high before, but at the same time, delinquency is at its highest level since about 2008. So our economy appears to be reliant just on the idiocy of the American consumers spending money they don't even have that they know they're not gonna have, but as they can have access to credit, they're gonna go ahead and continue to spend it. And that should alarm almost everyone. If you think back in the 1920s, if you read books on recessions, they thought we could save America during the great depression by Americans playing more miniature golf.

It's true. You can look it up. They thought if Americans would just go out and take their few pennies instead of buying food and play miniature golf, that we could rebuild the economy based on nothing more than miniature golf courses. And everyone would work at miniature golf courses and we'd eat at miniature golf courses. And clearly that was a fantasy that was not based on any underlying fundamentals at all. But right now, a lot of what you hear from people when it comes to recessions and depression seem almost as ludicrous of the things people threw out in desperation back in the '20s.Now, how did we get so goofy on our positioning of where the team currently stands? Well, part of that we all know is there was a lot of manipulation that was done during the Biden administration to try and improve the election. I'm sure if you look back on other outgoing administrations in history coming up on election years, you probably see just about as much manipulation going on. So I don't think we can just say, oh, yeah, no, it was probably just Biden. No, it probably was many presidents prior. It may have been some Republicans as well as Democrats. But we never had a media with the capability today through social media to send out such bad information so broadly and so quickly.

Look at the election itself. We were told that Kamala Harris was gonna win, or at least she was looking really, really strong up until the end. And it turns out it was all nonsense. She didn't win any swing states at all. Just think of those unemployment numbers. Think how they were talking about the fact that we had created 850,000 jobs, and then suddenly, quietly later, it turned out they made it all up, and they took the 850,000 jobs away. So what's happening right now is the average person out there is literally like a World War II movie walking into a German pillbox and doesn't have a clue what is about to befall them.

That's at least my sad interpretation. So the reality check is that the rebuilding process that we're going to feel is gonna be much more severe than the average American currently realizes. So let's move on to the pain side of what could happen. The stock market is currently trading at a price to earnings ratio of 38. Now, young people would say, I wonder what that means? Well, if you were classically trained back in the '70s and the '80s, as I was, maybe as an economics major in college, you know that the average for the stock market is 15. And if you read a lot of financial books, you'd see that early Warren Buffett books, he was adamant you wanna buy things where the price to earnings ratio is roughly 10. So if we're saying the average is 15 and the current price to earnings ratio is 38, the means the stock market is poised to fall by more than half to get back to its historical norm. I think that would frighten most people. That's probably why Warren Buffett, you probably know, has been a net seller of stocks for eight successive quarters. He's sold more stocks than he has bought by a huge margin.

He even gave people a glimpse of this concept when he said in one of his annual reports that the American economy had ended its glorious period. He was trying to say everyone a hint that, uh oh, you better watch out. Those stocks are probably not gonna be doing that well going forward. So I see when the recession actually takes foot and people realize, uh oh, we're in a recession and the consumers stop spending the money, which they don't even currently have, then I think you'll see a big stock market collapse. At the same time, you're going to see a final acknowledgement of the end of the collapse of office, retail, and to some degree lodging in the commercial real estate sector. These are all things that pretty much nobody needs anymore On the office side, as we all know, people today work remotely. If they don't work remotely, they do a lot of things not in an office today using FaceTime and and Zoom calling. So the demand for office itself is greatly restricted and it's not going to come back.

Retail is even worse. Everyone now shops online so they no longer need to go out to brick-and-mortar stores and on the lodging side business travel which is a huge part of the lodging component no one does it anymore because they would rather stay at home and not deal with how horrible air travel is today and just go ahead and do their meetings via zoom so the demand is not coming back we all know about supply and demand that's why office buildings throughout America are doing terrible in St. Louis Missouri where I'm near vacancy is around 40 to 50% so those are all internet damaged goods coupled with the simple fact that American consumer tastes have changed now on top of that you have what's called the commercial mortgage apocalypse it hasn't really happened much yet in depth we've seen some sides we saw the largest office building in St. Louis one million square foot building from the '80s nice looking building sell for less than four million dollars at auction. You've seen the same thing happen in big regional shopping malls Lenders have been escaping this by doing a perpetual extend and pretend. Pretending things will get better, but yet they really won't. So then where do we go from here? How does this rebuilding work? Well, the rebuilding is achievable. We can do it. We can turn things around we're a country that did turn things around even out of the Great Depression.

But there was a lot of pain involved and many people have forgotten how painful it can be. So how do I see this thing playing out? Well, number one, I think we're looking at a recession probably in 2025 or 2026. Why do I think that? Because all the stats show that. So I'm pretty comfortable That's a reasonable conclusion. I also see interest rates plunging at some point starting in that period. Not in little tiny increments like Jerome Powell would want you to have, but in much larger steps simply because when we hit that recession and things start getting bad, the government will definitely immediately try and react to save things.

Also, I think we're going to start seeing the commercial lending apocalypse accelerate coming up to a theater near you because the banks will no longer be able to be able to perpetually prop up these failing office and retail loans. But then I think you'll start seeing things improve in about 2027 or so. It's gonna be a much, much harder period than most people realize. But the bright spot to all this will be found in the mobile home park sector, really any affordable housing option. Why? Because we're contrarian in structure. So when things get bad, the demand for affordable housing always goes up. I think we all understand that that's a given. And meanwhile, interest rates come down during the recession.

So the very thing that fuels the demand also fuels interest rate declines as interest rates go down cap rates go down and values go up. Now we saw this very clearly in the 2007-2008 Great Recession. So we all know how this plays out. But you'd have to be about 40 to remember that. And many people have long forgotten how it all worked out for mobile home parks in the affordable housing sector during that period. But what happens is when you have the scenario of the declining rates, it makes everyone look like a genius 'cause all values go up no matter what you did, simply because the values of those properties accelerate, they go up when things get bad. So when interest rates go down, it makes all values go up, no matter what you did, no matter how much you raised the rents, no matter how many lots you filled. And I think we're about to enter that period again.

It's gonna be a rough ride getting there. It's gonna be a tough rebuilding year, but it's doable. It can happen but you must be prepared. This is Frank Rolfe, the Mobile Home Park Mastery podcast. Hope you enjoyed this. Talk to you again soon.