Morgan Stanley: Here's HOW BAD the Housing Crash will Be.

O Morgan Stanley just put out their

outlook for what their economists are

debating for the economy in 2024 and

they actually give a projection of how

much real estate prices might crash in

2024 I was somewhat surprised to see

Morgan Stanley talk about exactly this

and I was also surprised to see them

well uh you know say something that kind

of we've been talking about before as

well now just to quickly catch you up

before we hit their estimates the real

estate market has started picking up

again it hit a wall around the end of

September early October one of the

reasons it hit a wall was probably

because interest rates went up another

per. yeah it doesn't sound like a lot

but when you go from 7 to 8 and a

halfish percent 7 and a half to 8 and

half% it it's an impact people are like

okay you know what this is never going

to end turns out a lot of that was

probably because you had people like

Bill Amman shorting treasuries and

playing the market and uh real estate

temporarily took a little Dippy dud law

even though it didn't necessarily need

to in September I'm talking Super near

term okay now it seems like the buyers

are coming back out again but there's

very little inventory so you're seeing

the bidding wars again you just had like

a little six we breather what the

interesting argument is that I've been

making and then you're about to see what

Morgan Stanley says this is going to

potentially translate into in terms of

prices is a Resurgence of inventory in

the spring could lead to a decline in

prices after all think about this right

now you have low inventory but you also

have low buyers who are capable of

buying so what happen happens if

inventory goes down in the winter and

buyers go down in the winter then all of

a sudden spring hits and everybody's

like let's all sell our home now that

it's spring Boop inventory goes up but

buyers stay low that could lead to some

near-term softness in the real estate

market and could create some nice

opportunities to buy Morgan Stanley

talks about this and the economy let's

analyze this this is a note that they

just released here uh at here November

19th as you can see they just published

it as well even though the time there

looks like it was supposed to hit a

little earlier this just hit and we got

slowdown but no recession in their

Baseline scenario our economists

expected a significant slowdown in

domestic economies with inflation being

tamed but an outright recession being

avoided so now all of a sudden Morgan

Stanley as an entire Bank not just Mike

Wilson saying you know what probably

going to avoid a recession here and

worst case if we do end up having a

recession we would expect it to be a

shallow recession we've heard this

before pretty almost redundant dare I

say at this point now what is

interesting is they touch on China and

they admit that they believe or that

they overestimated the ability or the

willingness of Chinese or China's

government to actually stimulate the

economy leading to some of that softness

and continued deleveraging that we're

seeing in China it's basically a way

saying people are like yo government you

told us to take on a bunch of debt and

then you burned Us in the housing market

now we're like screw you we're just

going to deleverage and just stay out of

debt and the government's like that's

fine we are not going to print money

anyway so screw you too and so as a

result you have a pretty dang weak China

which of course Kenny G says b to dip on

yo it's China let's go okay that could

obviously be debated they talk about

potentially some more positiveness

coming to not just bonds but also agency

mortgage back Securities that sounds

pretty fancy let me just put that very

simply for you basically they're saying

in this paragraph here that come the end

of QT around the summer to the end of

2024 because we've got about 1 trillion

of QT left we're doing about 80 billion

that's about 12 months and we're totally

done right so somewhere between the end

of qt or the near end so call it July

and November of 2024 they actually think

there'll be a lot more stability in the

bond market which could be a buying

opportunity today one argument they're

making here but more relatable to the

real estate topic listen to this

paragraph right here short and sweet to

the point by the way before I hit this

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Style videos like under 5 minutes is

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you like the quick vid so what do we

have here us and commercial real estate

markets diverg over the course of 2023

their trajectory in the year ahead is

debatable dramatic affordability

challenges remain because of high rates

however looking ahead here's the line

folks you ready for this looking ahead

this should sound very familiar to

something that we've talked about before

uh but uh anyway here it is looking

ahead as rates come down what do we

expect well looking ahead as rates come

down we expect affordability to improve

and for sale inventory to increase okay

that makes sense rates down more people

can buy and inventory goes up us home

prices should see modest declines down

3% as as growth in inventory offsets any

potential increase in demand

more houses coming on compared to uh a

potentially buyers being available with

fundamental stress is still largely

unresolved though we expect the outlook

for commercial real estate to remain

challenging so in other words if you're

really concerned about residential real

estate yes maybe build in another 3%

buffer over at my real estate startup

we're build building in somewhere around

20% buffers this makes us relatively

insulated obviously $600,000 house uh 3%

is 18K if we're getting getting these

things for 150 to 200k on our market

value we think we're pretty insulated

but anyway I think it's worth looking at

this as basically one of two things one

think of this as yes there's still

uncertainty in the residential real

estate market much of the 10 to 20%

crash that we've seen in prices occurred

between May of 2022 and December of 2022

in most of 2023 at least January through

July prices were increasing now this

does mean you have to be careful of

using July August September comps if

you're trying to buy a property in Q4

2023 don't get screwed or misled by

those summer comps because prices have

come down since then Morgan Stanley

suggesting we can go down another 3% so

just have patience in the real estate

market I think is the most important

thing I don't think this Market's going

to run away from anybody and I think

there's plenty of time to take your time

be patient pick the right property and

don't overpay investors are grappling

with heightened geopolitical tension

ions while some Market signals such as

the price of oil suggest current

conflicts may be Regional the potential

for escalation shall not be ruled out

anyway there you have it for an about

6-minute video and now the disclaimer

thanks so much for watching we'll see

you soon goodbye and please let me know

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have done so much people love you people

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