Let’s Be Real: The 2023 Housing Market Crash.

real estate of bears and I suppose it's

also worth looking at some of the bear

arguments so let me pull up a bear

argument I was just reading about the

other day and I thought some of it was a

little disingenuous but then again

disingenuous bear arguments have kind of

been what we found rapidly throughout

2023 here so it's actually another one

of these uh reventure Consulting pieces

and there's talk about this mortgage

crisis brewing and so this headline a

piece here which got quite a few likes

on Twitter did very well here you know

7488 likes here is very good but anyway

this year indicates the debt to income

ratio for all home buyers and what you

find is that the DTI levels debt to

income levels for new mortgages sitting

at about 40 percent which is actually

higher than the 39.1 percent where we

were in the 2006-2007 a bubble now in my

opinion some of this is

you know obviously at first glance it's

concerning but it's worth noting what

this chart is actually showing you this

chart is not showing you the debt to

income level of all owners of Real

Estate

it's actually showing you the debt to

income level of new borrowers of real

estate and why is that so important it's

so important because the nominal number

of sales that are occurring in real

estate right now are actually at

substantial lows pull those up to show

you those but if you jump on over to the

Redfin data center you can see this in

detail and we'll go through that but

think about that for a moment in 2006

you were actually at the highs of number

of properties sold in fact we'll see if

the St Louis fed has one as well a

number of properties sold in the United

States we'll see if we can get a few

charts to compare here but this is

important to consider how many nominal

number of homes are actually selling why

does that matter it matters because if

you have let's just say 4 million home

sales in a year

selling where individuals have a forty

percent debt to income level but then

you only have two million sales in

another year where people have a forty

percent debt to income level well then

this scenario while it might actually

look similar to 2006 is potentially half

as bad as previously because you're

existing owner stock your existing

debtors so to speak it's actually

substantially lower uh than what you had

then so St Louis Fred indicator here

this is the their chart unfortunately

only goes back to July of 2022 which

isn't great but clearly shows you a

decline in existing sales here we'll

work on getting a little bit more data

on this but oh here we go home sold this

should give us the Redfin data center

should go back a little bit further

hopefully no also only goes back to

about 2020. it's unfortunate I'd like to

get a little bit of a larger chart here

but as we can see on the Redfin data

center as well we're at a substantially

lower level of sales and certainly where

we were in 2021 or 2022 by quite a bit

if we compare 2020 uh what do we have

here 2023 to 2021 you're down more than

40 percent in sales whereas year over

year we're down about 16 so that's

something to keep in mind as well is

that the existing level of uh of owners

will certainly probably have a

substantially lower 30-year fixed trade

mortgage where their debt to income is

actually way lower than what this chart

is revealing but as usual a single chart

can't tell you so terribly much about

what's actually happening in the economy

so I didn't really love this chart

there's some other insights here as well

such as this here home buyer down

payment over the last 25 years and this

idea that the number that the down

payment people were placing is declining

this really feeds into people's mostly

incorrect notion that the less money you

put down the less capable of a borrower

you are

pause for a moment and think about that

most people have this impression that oh

if you don't put 20 down you're over

leveraging your real estate but that's

not necessarily true especially if

you're able to get yourself a good deal

for example many of the course members

who are my real estate program on

building your wealth going from zero to

millionaire and real estate investing

find great deals putting three three and

a half percent or five percent down to

where after they buy the property and

they spend maybe say fifteen twenty

thousand dollars on Renovations it's

actually almost as if they've put closer

to 20 or sometimes even 30 percent down

because they bought the property below

market value so really lower down

payments I don't think are necessarily A

a sign of somebody buying uh you know

without the ability to qualify in fact

if anything and this is something to

consider for that first chart as well

the ability to qualify at all today is

substantially harder than what it used

to be back in uh you know the uh of 2006

six and seven period essentially anybody

was able to get a loan in 2006 and seven

whereas today you actually have to prove

that you have the ability to repay a

loan that might not sound like a big

deal to you but it's actually a

technical phrase in the real estate

world that A lender is signing off

saying I believe this consumer has the

ability to actually repay this loan

that's because back in 2006 nobody cared

if the person defaulted and you might

think that well that's wrong I mean that

could never happen

no it actually still happens today just

look at the subprime auto market so if

you consider the subprime auto market

you're finding that the underwriting

fees and loan fees that car buyers are

paying

mean that the lenders still make profit

even if 70 plus percent of the car

buyers default because they're taking so

many fees up front and even after they

sell the car for its residual value

after some form of liquidation of the

asset you know repossession liquidation

the lenders still make money

that's predatory Landing these subprime

auto loans are not actually signing

people up for a loan that the lenders or

dealerships actually believe that the

customer has an ability to repay for

that's very different from what you have

in real estate now so home buyer down

payments going down over the last 25

years you know from an average of say 21

to 18 percent

frankly matters zero in fact there is

another person on social media they made

a YouTube video uh and they're talking

about this impending real estate crash

and they did this classic fallacious

argumentation where where they go look

at this Bank of America now offering

zero percent down loans

you know what that means

and then they kind of Leave It to the

audience to conclude that somebody

putting zero percent down is actually

bad

but that's not actually true because if

somebody has let's say a 720 credit

score and they're getting a good deal on

property and they're getting a 30-year

fixed rate mortgage and they have the

ability to repay at that level because

maybe they have a higher salary but they

have less savings or are choosing to use

less of their savings because they can

borrow for a 30-year fixed rate term uh

and maybe they're walking into some kind

of uh race diversity based uh you know

credits or subsidies a lot of these

lower down payment programs like the

zero percent or one percent loans are

dedicated to either you know black

Americans Or Hispanic Americans or you

know whatever other demographics point

of that is to say that you can't simply

blank it and say oh people are putting

less down they must be poor

highly wrong in fact I personally have

put down three percent on properties

before

I ended up becoming investment

properties there are ways you can do

that we talk about a lot a lot on the

channel to subscribe for more uh and uh

uh and uh they're phenomenal deals that

you can make fantastic money in so again

putting down a lower down payment is

potentially a strategic way to leverage

uh and not necessarily a sign that

somebody is a low quality borrower

uh so uh this uh this particular

individual who continues to look at um

uh mortgage defaults versus the

unemployment rate is sort of the next

chart that they give here uh and they

make this argument here that while

mortgage defaults and uh and a lot of

foreclosures are coming you know I find

it hard to argue that you could say a

lot of foreclosures are coming when

frankly real estate prices have been

trending up since January I I don't

quite see that in fact when I go to a

market now if I in fact I was in another

foreclosure auction yesterday in Oregon

I walked through this foreclosure

auction uh and uh the agent and I were

looking at each other like you realize

it's like point five percent of the

market right now are foreclosures and

the leading pipeline of foreclosures is

still way below trend of the pre-covet

era I think a lot of folks forget that

they see sort of this this foreclosure

moratorium where foreclosures went to

zero and then all of a sudden you're

seeing foreclosures return and they're

like oh my gosh foreclosures are up 200

from last year it's like well duh they

were nearly zero you know so it's just

uh it's it's again disingenuous data and

my goal is always to look at how can we

put data and facts together to

understand what's really likely to

happen uh you know then there's this

argument like it's literally stated here

but for now mortgage defaults are low

because the unemployment rate is low and

because people are finding ways to take

out other forms of debt like credit

cards and personal spending but that's

unlikely to last you know I hear that

argument all the time and what you could

do is you could look at household debt

as a percentage of personal disposable

income that's actually a really

important ratio because you're saying

how much debt you have compared to how

much money you're bringing in just type

it in uh and a household Debt Service

payments as a percentage of disposable

personal income right here on chart

and I have to like my little screen is

covering up how low we where we are

right now is relative to where we've

been in history when we go back to the

80s people are spending 12 of their

disposable income on debt you go back to

2006 you hit a peak of 13 actually 2007

13 right now we're sitting at 9.6 and

it's actually started to inflect down in

q1 of 2023 which means we're actually

below trend of the 2013 to 2020 decline

in household Debt Service payments as a

percentage of disposable income so yes

maybe nominally the amount of debt and

credit outstanding is increasing

but as a percentage of people's income

it's actually decreasing so once again

it's very easy to skew people's opinions

and impressions of what's actually

happening when you're cherry picking

data that looks bearish and then

suggesting oh well people are putting

less money down

oh people have higher debt income levels

on new mortgages oh imagine that when

rates are seven percent oh people are

borrowing more yeah but then when you

add in the context you're like well less

people are borrowing which means more

people are likely fixed people are

actually spending less out of the income

they have on debt

and you look at the nonsense of the

Foreclosure uh uh this foreclosure

crisis would really most of this data is

is easily uh put into context and it's a

context that doesn't call for a massive

real estate crash now don't get me wrong

do we have our 15 correction up to 20 in

some markets absolutely do I think real

estate is Off to the Races and it's time

to you know YOLO and over leverage on

real estate no I think it's time to be

patient and prudent acquire good deals

ideally in the winter time frame you

know you're sort of October to February

time frame is usually a great time to

buy good deals because the people who

are selling generally need to sell and

there's an opportunity to negotiate you

generally tend to see wider gaps in the

list to sales price ratio that's just

sort of a fancy real estate agent way of

saying stuff sells for loose

and really when we put all the data

together it's like

you know it's kind of hard to say that

there's some sort of massive default

wave coming but uh it's certainly not

going to stop uh the the bearish video

making and again I you know I I I get it

like sometimes people like oh but Kevin

some of your titles are bearish tight

there's there's a difference between the

title being bearish and the actual

context of the video saying look here's

a bearish title here's why people are

talking about this bearish information

uh and then here's how that is either

true or not true and so we can we can

evaluate what's actually going on so I

think what's most important is the

context of the story and sadly these

days a lot of social media is just

convinced that there's this massive uh

correction coming in I think the the

true evidence of it and I would be more

than happy to say yeah there's a big

problem coming if I saw some really good

evidence of it the true evidence of it

is very very weak every time we we dive

into it which is a perfect way to remind

you about what Mike Wilson did the great

flip-flop appears to have occurred

okay before we get into that reminder

check out the program so I'm building

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if you're an existing course member make

sure to check out uh the link down below

uh or email us at staffmecaven.com if

you had some inquiries on that yeah I

see you're very bullish on the market I

was just uh I was just wondering in this

environment so I'm based in in London UK

and I'm thinking of buying a flat uh

obviously I'd have to get a mortgage

with near six percent interest rates so

I was just wondering if it's worth still

um just plowing uh you know money into

stocks rather than

into a down payment and then

sort of uh betting on housing going off

what do you think

okay great question so in in this

environment I'm not betting on a very

quick and near near massive runaway

rally in pricing for Real Estate but I

actually think it's a fantastic

opportunity over the next couple years

to get into real estate and look for

really good deals because I'm I'm of

this mindset that we're sort of in a

pause for Real Estate where you've seen

pricing that has come down since May of

last year and sort of increased since

about January that's at least been the

pattern here I would look at that

specifically in your area but that's

been the pattern in most areas that I've

analyzed some areas are already higher

than where they were last year but let's

say we're somewhat on this trajectory if

we started out with

uh a this this incredible Bull Run of

real estate in 2021 expect that to be a

lot more flat and modest over the next

few years uh as interest rates come down

we'll probably see more sellers to

offset some of the benefits of interest

rates coming down and that Dynamic will

probably take a few more years to play

out which personally I think is a great

opportunity to be patient but active in

the market and so what I mean by that is

hey be patient look for a great deal but

be ready to strike a lot of people take

real estate patients for granted and

they they just don't get ready to buy

real estate so what they'll do is

they'll say oh I'll get pre-approved

tomorrow and they basically say that for

years and then they never get

pre-approved and they never get ready to

start buying and then all of a sudden

you're five years down you're like ah

dang it I should have bought real estate

you know five four or three years ago

because now all of a sudden prices are

jumping again so from a near-term

speculation point of view I I don't

think we're we're like in the greatest

rush to go all in on real estate kind of

like what 2021 felt like uh I do though

think that buying real estate is almost

always going to be a great opportunity

for everyone I don't obviously know your

personal financial situation but I I

don't really care so much about

near-term interest rates I'm of the

mindset that in the longer term we're

more likely to be facing deflation than

we are to be facing inflation now uh

yesterday we myself and the team we were

having a little bit of a discussion

about just that where if we go back to

2010-ish we'll see inflation was really

running at about 1.7 percent at least to

here in the states between 2010 and

2020. to the point where the Fed was

even considering lowering their

inflation Target from two percent to

1.75 because they just couldn't get

inflation up to two percent and I

actually think that at the same time

since we were rapidly expanding the

money supply it's likely we were

actually in a deflationary environment

but the regular money printing that we

were doing that we were conducting just

kept us slightly above uh a deflation at

around 1.7 percent

point of that is to say that we're

likely to Resort back to a lot of

quantitative easing QE Infinities in my

opinion likely to return and therefore I

think that building out assets your

control of stocks or real estate really

over the next two three years here is is

very prudent because in the longer one

expect as we're back to QE Infinity the

highs that we saw in November of 2021

might end up being laughable compared to

what actually ends up coming following

hopefully a productivity artificial

intelligence and sort of rejeggering

Economic and boom for the global economy

going forward we'll see we shall see so

thanks for that question Martin I think

it's a really good question following up

on that is actually worth noting what

China is up to China for example uh just

finally yesterday started talking about

uh some more stimulative measures again

now short of providing any kind of high

detail of what kind of stimulus we would

expect effect from China and people are

still very skeptical that China is

actually going to provide anything

China has once again reiterated that

they're interested in supporting the

real estate market with easing

stimulative measures now there's been

sort of this Duality going on with China

that on one hand if they just send

helicopter money they might actually

lose power compared to the corporations

in China which has maybe put a lid on

how many how much in stimulative efforts

they'd like to conduct but they are big

fans of promoting the real estate market

something that has obviously been

crushed uh in part due to Reckless

policies in China that allowed a

substantial over leverage for developers

and the selling of properties well

before they're completed leading to

almost a real estate Ponzi scheme dare

say but the good news is in countries uh

like uh America or the United States

obviously or England and assuming you're

in England

you might not uh you might not actually

have too much fear for real estate and

some of the higher quality areas now I

want you to know this when it comes to

AI time is what's going to make you

money and if you can prove that value to

an employer you'll always be able to be

employed so this is another way of

making sure that you don't get replaced

but

foreign