The Truth: The Housing Market is going into Depression.

the housing market is one of the largest

contributors to wealth in people's lives

the average net worth of a homeowner

after all is nearly 20 times that of a

tenant and a fall in home prices are

expected to destroy already low consumer

confidence and lead to less spending

potentially pushing us into a recession

we already know that for every one

hundred thousand dollars in net worth

someone loses they tend to spend two

thousand to three thousand dollars less

per year a statistic that is very

concerning given that together in the

united states we have amassed a

43.4 trillion dollar housing market and

folks

let this be a warning to you the housing

market disaster just got worse now sure

you might be thinking come on home

prices are at record highs like what do

you mean things have getting worse it

sounds pretty good well that's what

you're going to learn in this video

first you're going to see why the fed is

fueling the fire to destroy housing and

actually increase inflation before they

decrease it which is a substantial irony

then you'll see the cracks forming in

the housing market i'll give you

evidence with what home builders are

telling you right now

and you'll learn what to watch for so

that way you can be in a position to

profit

first let's talk about and learn about

inertial inflation and its impact on the

federal reserve and how it ironically

can increase inflation before it can

lead inflation to go down

and how it crushes the housing market

the federal reserve has already raised

rates to one and a half a percent at the

fed funds rate and we're now expecting

the fed to raise rates all the way up to

three and a half to four and a quarter

percent potentially all in an effort to

stamp out inflation they're now mostly

single mandate goal and inflation at all

costs even if that means the destruction

of wealth of americans and potentially

even twice the joblessness rate we face

that we have today but folks there's a

fundamental flaw in the way that

inflation is calculated

33 percent of inflation is awaited on

what's known as owner's equivalent rents

to try to get an understanding as to

what people's housing expenses and how

their housing expenses are changing over

time however this reported rent does not

accurately reflect what market rents are

in fact there's a very clear lag between

market rents increasing and owner's

equivalent rents increasing most

research including the projection chart

on screen from jpmorgan suggests that

owner's equivalent rents lag by about

six months and this creates really

massive issues in a board of governors

discussion paper by the federal reserve

titled monetary policy housing rents and

inflation dynamics we learned of

something very ugly that when the fed

tries to get inflation under control by

raising rates they have the effect of

increasing mortgage rates that can drive

more people to rent properties driving

up the cost of rent while reducing the

availability of homes for rent again

contributing to an increase in the cost

of rent then six months later higher

rents show up in cpi inflation and this

is the substantial irony that the more

the fed raises rates

the more people are driven to renting

and not buying because buying becomes

substantially unaffordable and now the

fed is actually driving up something

that has a one-third weight in inflation

so even if airfares were to come down or

even if apparel or used car prices came

down leading inflation to come down they

might be immediately offset by increases

in the owner's equivalent rents which is

sort of a misleading way of measuring

housing and rent inflation anyway but

this is ironic again when the federal

reserve and we know this when the

federal reserve raises rates buyers lose

purchasing power to the tune of about 10

percent per 1 percent increase in

mortgage rates so if mortgage rates go

up 3 percent buyers lose about 30

percent in purchasing power

but if at the same time the federal

reserve is actually driving up one of

the heaviest weights in the inflation

basket

then the fed is actually creating more

pain in the short term by raising rates

driving up the costs of rent also

driving up the cost of producing goods

again via increased wholesale prices

credit lines you name it and so what

ends up happening before things get

better things get worse and that could

lead the federal reserve to raise

mortgage rates even

more than they actually need to

leading the housing market to experience

even more pain and folks the cracks are

everywhere yesterday lennar reported

earnings they are the second largest

home builder in the united states that's

been building homes for almost 70 years

take a look at some of the sections from

the lennar earnings call

some would call it a disaster and what

you're about to see is a warning that

should make you really interested in

preparing yourself in getting ready for

what's to come but see we don't get

taught about real estate in schools or

by most of our parents i feel blessed to

be part of a real estate family who's

been buying below market wedge deals and

property managing professionally for 40

years and as a real estate broker for

over 10 years a former licensed lender

and licensed contractor someone who went

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by 23 years old with nothing at 18 to

over 20 million dollars of real estate

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building your long-term wealth and let

me tell you the cracks are here folks

the cracks are here and this is why this

is the most opportune time to get

educated in real estate take a look at

this report from lennar this report from

lennar is out from june 21st 2022

it's a very recent look into the housing

market and what's happening

take a listen to what lennar the second

largest home builder in the united

states is telling you quote so far in

june new orders traffic sales incentives

and cancellations have worsened in when

in many of our markets do the rapid

spike in mortgage rates and headwinds

from negative economic headlines

and the pain falls under three

categories category one minimal impacts

category 2 modest impacts and category 3

significant impacts

take a look at category 1

florida jersey maryland charlotte

indianapolis chicago dallas houston san

antonio phoenix san diego orange county

and the inland empire all of these

markets have benefited from extremely

low inventory and many of them are

benefiting from a strong local economy

employment growth and then migration and

while these markets continue to be

strong here's your crack

our sales pace and purchasing power has

started to flatten or has flattened in

each of these markets so even though

these are hot markets with low inventory

purchasing power has flattened or is

flattening

these are the good markets

category 2 markets this is where things

start getting worse atlanta

colorado charleston myrtle beach

nashville philadelphia virginia the bay

area reno and salt lake city in each of

these markets traffic is slow and we've

seen an uptick in cancellation rates and

they're now having to offer more

aggressive financing now one of the most

important things to know about a home

builder is that home builders don't like

lowering prices so when they lower

prices you know things are bad they

would rather give you what are called

builder incentives such as buying down

your mortgage with incentive aggressive

financing programs or by giving you more

incentives to spend money

on

improvements for your property

and so when they're talking about

targeted price reductions selectively

reducing our sales prices to solve for a

mortgage payment that works for the

buyers and now they're trying to sell

you on a payment

you know we have issues

category free market

more significant market softening and

correction

including areas like raleigh minnesota

austin texas

los angeles central valley sacramento

and seattle

raleigh was an extremely strong market

but softened significantly at the

beginning of june these cracks are just

now starting people keep talking about

how great the housing market is

you know how great it's been so far even

this year oh it's holding up great the

cracks are just now beginning

take a look at this

as a result we have room for needed

future pricing adjustments because

prices have gone up but look at the

minnesota market it's been very

challenging buyers have always been

conservative in this market and rates

have increased but there's now been a

strong pushback against the current

pricing

this is a problem

and they now see strong price reductions

austin texas higher rates in june and

headlines on the stock market declines

have distressed the national economy

sidelining many buyers who are waiting

for a reset in home values and while

inventory is limited right the biggest

argument that everybody keeps saying oh

real estate can't go down because

inventory is limited oh yeah well what's

happening in austin cancellation rates

have increased and we've reduced home

prices in many communities on a home by

home basis and have offered extremely

competitive mortgage programs these

pricing adjustments are starting to

generate increased sales activity but

again they're having to drop prices

take a look at this los angeles central

valley and sacramento extremely credit

challenged buyers with cancellation

rates

increasing and

what do we have in the q a

well one of the executives at lennar

telling you at the end of the day we're

probably going to push more people from

home ownership towards renting that

means multi-family traditional

multifamily as well as single-family

homes for rent

and again

exactly why you want to become an expert

real estate investor because the

opportunities for rents going up and

prices going down are an opportunity to

make money and to build your wealth your

long-term wealth

but wait a minute is this just happening

in the united states

no

of course not take a look at the index

for frothy markets throughout the world

the united states ranks seventh with a

price to rent ratio of 139

and a price to income ratio of 135.

new zealand tops the list followed by

the czech republic australia canada

portugal

folks this is a global issue and why

this is happening should be obvious more

than 60 central banks around the world

have raised rates this year

and they're not on pace to slow down

their rate hikes

anytime soon even jerome powell the

chairperson of the federal reserve said

today that home prices are quote

unsustainably high in front of congress

and sees no chance that home price

appreciation doesn't slow if not

potentially lead to a fall in home

prices he went as far as saying this to

first-time home buyers just last week i

would say if you're if you're a home

buyer somebody or a young person looking

to buy a home

you need a bit of a reset we we need to

get back to a place where where supply

and demand are are back

together and where inflation is down low

again and mortgages or mortgage rates

are low again so this this will be a

process whereby

we ideally we

we do our work in a way that where the

housing market settles in a new place

and housing availability and credit

availability are at appropriate levels

redfin just reported that at the end of

the year 61.6 percent of people could

afford a home on a 2500 per month budget

today only 45.6 percent of homes are

affordable with this budget throughout

the entire united states and in phoenix

only 21.5 percent of homes are

affordable

of course the same argument that is made

that oh housing can't fall it won't fall

it'll continue to rise

is one that increasingly seems unlikely

those who suggest that well but kevin

there are more households or more people

in buying age or in the buying age today

than there were in the mid-2000s

conveniently forget that homes are now

60 more expensive than the mid-2000s and

in many cases double to triple what we

had seen previously but also that home

prices have substantially outpaced

increases in incomes with home prices on

average 20 percent more

than incomes have risen

supply chains have also created another

potential disaster for home builders

take the dallas texas market for example

there are now twice as many homes in

construction in the dallas market than

at any point in the past this is

partially due to massive supply chain

led delays that have stalled the

building process as home builders waited

for garage doors or even appliances like

refrigerators and dishwashers or windows

or doors you name it

that temporarily depressed housing

inventory towards the end of 2021 and

beginning of 2022 but as that inventory

comes online towards the end of 2022

at the same time as interest rates are

now four percentage points higher than

where they were in the past that is the

recent past just december

we could expect a disaster of a flood of

inventory

just at the wrong time when rates are

high

so what's likely to happen well first

multiple offers go away redfin has

already reported that the share of

multiple offers per home is going down

second we start seeing price drops on

active listings nationwide we've seen a

substantial impact in the number of

homes with price drops you can take a

look at this yourself but just looking

at the redfin data center look at the

redfin data center of percent of active

listings with price drops in the entire

united states average together on a

rolling four-week average this means

it's even worse probably now and this

data right here as of about 10 days ago

it updates about every two weeks but

take a look at this

this black line here is 2022

and we are seeing substantial price

drops more than we have ever before in

the last four years

this is how it begins folks

price drops what happens after price

drops more stagnant listings this is a

sudden and stark transition and after

these price drops come of course

inventory stagnating and building up

that is

less home selling every single month

despite price drops more homes sitting

on the market

then we'll actually eventually start to

see home prices fall

and see the thing about real estate is

real estate moves very slowly homes are

appraised based on previous month's

sales so it could take three to six

months sometimes even longer to actually

see home prices be affected that's

because people buying in march look at

what people paid for their homes in

january and think maybe they're getting

a good deal in march because they're

paying the same price and prices haven't

gone up but oh wait a minute the person

buying in january had a two and a half

percent mortgage the person buying in

march had a four and a half percent

mortgage the person buying in june had a

six and a half percent mortgage

prices will come down

even agents can feel it happening

immediately with more buyer anxiety

cancellations and lower offers and we're

seeing it in the data as well

once prices start to drop there's then

the fear that mainstream media will over

dramatize the drop and potentially lead

to more selling or panic selling now

some say but who would move because if

you sell you're just gonna have to rebuy

again at a higher interest rate it's the

most common question i get asked

but folks who ask this question don't

understand how real estate works

there are plenty of people who sell

homes every single day and don't buy

another home in fact as a real estate

agent maybe one in ten of my home sales

was somebody who was selling to buy

another home that's because some people

retire they move into an existing

property that they own an existing

rental property they move in with family

or maybe they're a second home seller

raising money to buy other assets or sit

in cash or they're investors who

straight up don't have to rebuy because

they're a mom and pop landlord or

they're a hedge fund these are companies

that or people who do not have to rebuy

when they sell some people also just

decide i'm going to sell on purpose and

go rent and they contribute to rent

prices going up

so what should you do well first get

educated as prices fall you need to

educate yourself prepare for the

opportunity of a lifetime to buy real

estate and depressed values learn how to

identify deals and work with people real

estate is a people business and if

you're not aware of the tricks of real

estate you can learn everything linked

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expiring in a few days before prices

rise again and you can join me in

private live streams where we talk not

only about the market but about what i'm

doing in real estate and we analyze

deals together

second should you short home builders or

the real estate sector

possibly

according to bloomberg the msci world

index

the real estate

sector of the s p 500 or the msci world

real estate index still sits above its

10-year average

that means real estate prices in the

stock market

still actually have a substantial amount

of froth left in them even though many

home builder stocks for example have

already fallen 25 to 40 percent

there is more room to fall

third you should raise money and pay off

your debt now is the time to work harder

and smarter to get out of debt don't buy

or lease a new car don't finance

anything and start paying down debt to

prepare to buy real estate

fourth stay away from syndications they

are the most expensive form of buying

real estate often with promoters who

charge insane fees like two percent

management fees every single year and 35

waterfalls it's insane

fifth

share this video tell your friends and

families about what's happening

you're owed the truth and a falling

housing market could mean more

joblessness and the wealth effect of

falling home values crimping our economy

into a recession so be prepared and get

ready now is the time to be a survivor