The Summer of 2023 Housing Market Crash.

oh it's been a minute since we've talked

about the real estate market and that's

always been mine bread and butter not

only as somebody who became a real

estate agent at 18 a real estate broker

that became a top selling agent in my

city uh by myself without a team I just

provided value for customers that was my

trademark meet Kevin the no pressure

agent providing more that was my slogan

trademark I hung those things off my

signs the sign writers uh and so the

real estate market is is a place that

I'm highly fascinated about and I know a

lot of times when I talk about the

market people like oh so you're an agent

so you're biased I know I don't

represent clients anymore I really don't

care uh What uh what happens I like to

buy properties below market value by

buying fixer-uppers and improving them

and those are specifically single family

dwellings and it really doesn't matter

what the market does there's plenty

money to be made there no matter what

that's why I got a real estate startup

called outside but beyond that we've got

to talk about and that helps us provide

affordable rental housing stock which is

important because not everybody in

America is going to be a buyer and you

actually need a quality landlord in my

long-term goal is to actually make house

act like the most quality landlord in in

America because landlords have such a

crap reputation because most of them

suck okay uh intro aside we had to talk

about the market and what's going on at

some expectations of the market and some

news so the first thing we've got to pay

attention to are mortgage rates they're

at the highest level in the last year

10-year treasuries have actually

skyrocketed since the banking crisis

lows of around 3.3 percent all the way

to about 3.74 which has basically LED

mortgage rates to go up remember how to

track mortgage rates you just want to

Google mortgage rates and then go ahead

and set the credit score to the best

credit score you generally get uh rates

under which is 740. some credit unions

want 760 but generally 740 and up you're

going to get the best credit score but

when you first look at Google you might

end up with like a 720 which which will

make rates seem even higher but if every

single day you just look at the same

rate you can kind of track what's going

on and right now the 30-year fix is back

over seven and a quarter percent it's

very expensive new construction home

builders are able to buy down this rate

and they're the ones who are actually

driving in my opinion some of the

largest amount of housing price

appreciation or catch-up appreciation

that's potentially problematic because

first of all new construction homes have

already taken double the market share

that they usually have they're somewhere

around 30 percent of all sales are new

construction homes well new construction

homes typically are sold by Builders who

are incentivized to keep the price

stable but just throw more incentives at

you to get you to pay the price so you

can actually artificially prop up prices

with new construction home sales because

for example if somebody's willing to pay

500 grand for a house with a three

percent interest rate

but then they're willing to pay 500

grand for that same house with a seven

and a quarter percent interest rate if

they get a hundred thousand dollars of

upgrades well as a comp it still looks

like a five hundred thousand dollar sale

even though it technically sold for 400k

100k uh off of that a price for

incentives that's just a rough example

obviously the real math of that will

look a little different since it could

come in the form of or an interest rate

buy down construction credits maybe a

partial price decline uh for for the

Builder but all of it together Builders

are really propping up the home prices

because they're taking a larger

percentage of active home sales right

now and that's normal because we are

actually in this bizarre time where

people aren't selling because they've

locked in low interest rates of the past

by a 30-year fixed rate mortgages to

some extent it's possible that the

United States housing market may never

see an actual real housing crash again

thanks to the 30-year mortgage now I

don't want to come across as saying oh

housing's never going to have a

correction we don't know I mean of

course that could happen and markets are

cyclical right the housing market is

cyclical which means it goes up and then

it goes down there's a real estate cycle

but what I do believe is that the

30-year mortgage has compressed that

cycle and that wave of the up and down

has potentially gotten squeezed or at

least the Bottom's gotten squeezed by

the 30-year mortgage because people

aren't forced into selling even if their

Equity potentially goes negative for the

short term that's very different in the

stock market where people get emotional

and can trade instantly uh and there's

no lock-in period right you're almost

locked in with real estate with that

30-year mortgage even though you're not

and real estate can have good liquidity

if you know what you're doing and you

know how to price real estate uh it's

surprisingly I mean I sold all of my

real estate in the first uh well almost

all of my real estate I've got five

properties left but I sold about 20 21

or was it 22. somewhere around there uh

over 20 million dollars of our own

personal real estate that we sold the

beginning of 2022 and people were saying

Kevin

there's no way in March and April of

2022 you're going to be able to sell

this real estate quickly and wow within

three months it was all sold real estate

can be surprisingly liquid again if you

know what you're doing

but the argument here is we don't know

necessarily that because of this 30-year

lockup that there's going to be some

kind of large correction to the downside

in the housing market there is one way

the housing market could correct and

we're going to go through some some

indicators of this and some stories in a

moment but the biggest thing that you

want to pay attention to to see if

housing is going to correct is inventory

and so far housing inventory has still

not risen that keeps pressure on prices

and this gets set up actually the

Paradox of interest rates the Paradox of

interest rates is the following

ordinarily when interest rates fall home

prices go up the factor is 10 to 1. when

interest rates fall one percent home

prices or purchasing power by buyers

should go up 10 percent

one percent decline in rates 10 increase

in purchasing power but if inventory

goes up 20 you could actually see a net

negative so in other words the inventory

Paradox or this this interest rate

Paradox would be as

interest rates eventually fall will we

see more inventory and an inventory

normalization which actually puts

pressure on prices it's possible but

nobody knows

the point is

there it's not a foregone conclusion

that real estate is just going to Moon

again when rates go up now that's not to

say that real estate is going to crash

but we're not going to see this sort of

covid mooning necessarily as rates fall

again because there's likely going to be

an increase in inventory

now beyond that housing prices are

negative year over year and let's look

at some data here so housing prices are

negative year over year about three to

four percent depending on where you're

looking now it's actually surprising

because housing prices have done well to

somewhat catch up with uh what housing

prices did last year the black line is

2022. the blue line is 2023 had this

blue line stayed flat we would be at

somewhere around negative 10 to 15

percent if you looked Peak at about 387

Nationwide to trough at about 341 well

341 divided by 387 was about okay about

a 12 decline in home prices Nationwide

is what we saw Peak to bottom well

that's already behind us and right now

year over year we're only down about

three to four percent in most areas

which is good

however inventory is also really

dangerously low in fact I believe

inventory levels are even lower uh than

where we were let's go to active

listings over here where was it there it

is uh inventory levels I believe are

even lower than where they were last

year let's see here this is these are

active listings maybe we go to new

listings so here active we'll go we'll

go there as well here are active

listings so we actually have more oh

that's it that's really interesting more

active listings that's wait a second

here active listings yeah a number of

active lists oh that's actually very

surprising okay well we'll look at the

data and try to understand it here uh so

we're closer to 2021 and the number of

active listings that we had here at the

beginning of the year it's possible that

at the beginning of 2022 as interest

rates started Rising uh active listings

were somewhat depressed but this is

interesting to me that we actually have

a little bit more on the active listing

side right now let's look at new

listings how many coming onto the market

it this is where you see less new

inventory coming on you actually have

more sitting on than more active listing

sitting that you had in 22 and 22.

that's pretty surprising but it's good

to know it's what the data is so now

here's what's interesting though is look

at this here's how it could flip flop

see how we could have an intersection

here if this trend continues for active

listings soon we're going to intersect

and we'll be at less significantly fewer

listings than where we were last year

for example let's assume this slowly

goes up and we go to 800k listings over

here which uh looks like it'll be uh

well over here would be around July

let's say we get up to 800k listings so

this blue 2023 line rotates up a little

bit we would still be about 150 000

listings below where we were in the

summer of 2022. so you definitely see

that shortage uh coming the shortage

here is is either a parent now or coming

in in my opinion in order to actually

see prices decline more you would need

to see this blue line of active listings

go well above both of these lines both

above 2021 22 you'd probably have to

have over a million active listings in

all of the tracked Redfin markets okay

so keep an eye on this chart you could

look at this chart yourself just go to

the Redfin Data Center and you could

look at this chart yourself

so then we jump on over here homes in

Austin and Boise are selling for 80 000

less than a year ago now one of the

things that I do notice is that real

estate is pretty localized and this has

always been the case all real estate is

local we say after all location location

right but if you go to Florida

's actually done pretty well if I go to

median sales price

so look at that median sales price

median sales price as of last month was

flat in other words no declines in Tampa

you're just now starting to see those

declines that wedge right there look at

that you're just starting to see a

negative two percent there in Tampa just

uh actually that's updated since the

last time I looked at it just last week

uh and then if you look at Miami Miami

is actually seeing a four percent

increase over last year's prices so

Miami doing exceptionally well sometimes

this happens when the dollar strengthens

though people want to park more of their

money in America and Miami is one of

those unique destinations well not only

is it sort of like lately been teamed

sort of this crypto Capital but it's

always and also a place where you're

getting like Citadel moving and stuff

like that so you're getting more Tech

moving over there but beyond that

Miami's always been a place where people

from South America have parked their

money whether it's from Venezuela or

Colombia or whatever and people have

mark their money there I grew up in

South Florida so I understand South

Florida very well I spent 16 years

growing up there and I love Florida but

uh there there there's some there's a

lot of uniqueness to Miami and so it's

really hard to pinpoint potentially

exactly why you're seeing this but what

you can definitely say is if you look at

a uh coveted destination covet

destinations have gotten quacked like

absolutely reamed uh look at this Boise

461 your minus 15 year over year I mean

you want to buy the dip look at Boise

right now Austin's actually potentially

another example looks like the bottom

potentially for Idaho was somewhere

around March and if we jump on over now

to Austin Texas uh also about negative

18 from the peak over here uh which is

roughly where we're comparing to now so

as usual all real estate is local so I

don't think this is a terrible surprise

that they're pointing out Austin and

Boise those are probably more of your

coveted recipients that's just

pre-accelerated some house price

appreciation gains housing market update

fewer metros are seeing home price

declines as lack of inventory keeps

prices afloat this is going to be very

interesting seeing what happens with

inventory that's a reflection of a

mismatch between demand and Supply

propping up prices pending home sales

are down 15 percent from a year earlier

but that's much smaller than the 24

decline in new listings today's elevated

mortgage rates continue to discourage

homeowners from selling nearly all of

them have mortgage rates below six

percent this week's average 30-year

fixed was 6.39 percent uh that was five

days ago though mortgage rates have gone

up since then as we saw now we're

potentially over seven percent seven and

a quarter percent

there are only four Metro U.S areas

where it's cheaper to buy a home than to

rent Detroit Philadelphia Cleveland and

Houston well this is because of mortgage

rates being so high right now

uh how much are home prices rising or

falling the answer depends more on

location uh than it has in over a decade

yeah a lot of volatility uh and look at

that San Francisco minus 10 Miami uh

what is this up uh 10 oh this is a 13

year high during pandemic during the

pandemic uh another thing that we're

seeing is rents uh in fact I had a piece

on rents that I wanted to go through uh

let's see here I believe that is

Reds uh rents are starting to slow down

which is very good let's see if I could

find exactly where it was but basically

rent growth

uh rent growth there we go rent growth

is starting to slow down substantially

to where basically rent growth inflation

is basically zero which is absolutely

fantastic uh do we find it here rent

growth slowed

this piece is from now this is too too

old that's from March uh so so I I can't

remember exactly where it was but the

point is rent growth has almost hit zero

uh year over year and that's really

phenomenal we want to see rent growth

slow down because it's a really big

piece of uh inflation housing represents

an increase uh of 32 percent of CPI to

now 34 percent of CPI in 2023 and uh

rents at the beginning of the year have

still been growing relative to 2022 but

here in May we're actually starting to

lap some of those big gains of last year

and that's really good for inflation so

if you're looking you know if if you're

looking for good news about potentially

for the stock market or for inflation

you've got good news in the face oh here

it is I found it it's for May 11th uh

you've got good news coming in terms of

rent inflation and its contribution to

inflation because look here

look at this chart of rent growth

slowing for not only the 11th straight

month in April but the year-over-year

change is now flat thank God rents going

up was ridiculous uh and if you look

over here here the median asking rents

median asking rents have really

flattened and really slowed down uh so

so this is this is good right it's not

only good for normal Americans who can

now afford homes more uh and I think as

the supply and this is actually really

important if you're a landlord or an

aspiring landlord I want you to be

really cautious of something

a lot of landlords right now are buying

properties and they're being sold on

these rental comps I want to be like

crystal clear about this so let me just

take a screenshot of this and show it to

you uh what I mean by uh graphically

this is

this is dare I say the real estate

potential manipulation that could lead

you to make a mistake in real estate so

just be careful about this be cognizant

about this in your calculations so first

of all when somebody buys a rental

property they almost always overestimate

what they can rent out the property for

but in addition to that already Baseline

overestimate that ambitious landlords do

you're now in a situation where a lot of

people are looking at comps from look at

this

the summer of potentially here August to

September of 2022 people are looking at

these rental comps

and your actual rents are as much as a

hundred dollars lower right now than

they were here

that's a problem you want to be careful

if you're a landlord because you don't

want to get screwed basically uh into

buying something thinking the rent to

say 2500 but then the rent you know last

year was actually probably 2400 and now

it's 100 below that you're potentially

200 off that could be the difference

between being cash flow positive and

being cash flow negative so be very

careful about that this is a very good

thing for inflation especially since

you've gotten more homes being built and

constructed which add to housing stock

which is good for affordability

but all of this make does make you

wonder hey when is housing for sale

inventory actually going to rise right

now what we're starting to see is U.S

rental rates go up their vacancy rates

go up that is and so something that's

interesting about rent is that rents can

also have an effect on home pricing

because if

people who hold rental properties decide

you know what

rents aren't going up anymore I'm not

getting what I used to get let's sell

and you start getting more landlords

selling and you get more housing

completion from new construction you

could see that inventory increase again

you don't see the inventory increase

prices will probably stay stable or just

slowly keep Rising again if you see the

inventory increase that's probably where

you're going to get some pressure on

real estate but that could potentially

be a good opportunity for you to buy

real estate now I have a program called

zero to millionaire real estate

investing where I teach you how to

actually analyze a deal to know if

you're getting a good deal the the real

Crux of it is not only how to manage a

property correctly but to understand

what a good deal in real estate actually

is is it that cash on cash return or is

there more to the analysis hinted

there's more to the analysis anyway

check that out link down below uh next

to the other programs I'm building rough

including the how to make more money and

get sh9t done faster program on helping

you make more money so you have more to

invest so you've got investing programs

on stocks or real estate or property

management and then how to make more

money which helps you invest more

so uh you know with this said another

thing to consider when it comes to

rental vacancies is you have to wonder

why would rental vacancies be rising and

that's because there's something known

as negative household formation that's

happening right now negative household

formation is a way of saying that

when people like uh you know a 25 year

old after college during covid used to

go out and rent their own apartment they

might now be going back and living with

Mom and Dad and let's say both there

there's a brother and a sister doing

that brother and a sister come back and

move in with Mom and Dad you just took

three households and turned it into one

that puts less pressure on home buying

less pressure on home renting which

again could potentially Drive rents and

prices down so negative household

formation hurts real estate price growth

we could all agree on that during covid

we had a massive explosion of household

formation people taking a a mom a dad a

a son and a daughter and those splitting

into three households that's what was

happening after covet or during covet

even whereas now the opposite is

happening it's like you're putting the

pieces of the egg back together it's

kind of weird that is a negative on real

estate so the good news for Real Estate

is that inventory has remarkably stayed

low that is a great support for real

estate and if it stays that way real

estate will continue doing just okay

it'll be totally fine yes some markets

are going to be hit more than others

like Boise and Austin and San Francisco

and markets like Miami are going to

continue kicking butt

but if we do get a surge inventory there

might be some opportunities for you to

negotiate better deals or be in a

position where uh you you actually have

more Choice again which will actually be

nice hopefully around the same time that

rates fall which will be an interesting

Paradox that rates could go down and you

might have more leverage over sellers

because you'd think there'd be more

buyers to offset at that point right

maybe maybe not especially how many

people sort of got hurt during this last

recession if everybody ended up moving

to cash who would have otherwise bought

and they missed out on potential stock

market gains then then that's the oopsie

dupe season maybe because of that you

end up having less buyers but who knows

nobody really knows but what we will do

and what I will promise is to continue

bringing updates on this so make sure to

subscribe share the video if you found

this helpful pay attention to those

inventory levels I think that's probably

the number one thing to pay attention to

for Real Estate right now uh as uh and I

do think we will have

an answer by the third quarter of this

year as to whether or not we're going to

have some kind of rug pull in the

economy that's really going to crash

housing or for actually going to be in

the direction of sticking a soft Landing

so we'll see for now I've got to run on

over to the course member live stream I

gotta put the link over there I gotta do

that right now uh so we'll go I'm like

another cup of coffee we'll go live in

the course member live stream in about

five minutes that's where we do real

deep dive fundamental analysis like we

did on Open Door when it was a buck 30

to a buck 50 we said this thing's

potentially going to two to three

dollars because the fundamentals even

though I hate open door or the

bullishness we had on palantirabill.com

before earnings join us for these

fundamental analyzes lectures and learn

how I do fundamental analysis on both

stocks and real estate link for us

[Music]

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