The Housing Market is about to FLIP

everyone meet kevin here did real estate

just peak let's talk about something i'm

seeing in the data for real estate and

some of you might remember that back in

2020 in a march

when we were really worried about the

real estate market like oh my gosh

what's gonna happen like oh my gosh if a

lot of people end up

passing away that means maybe a bunch of

fixer-uppers are gonna be on the market

and then oh my gosh what if the market

crashes like seriously that might sound

like gruesome but

that was a fear when the pandemic began

that oh my gosh a bunch of people were

going to pass away and there would be a

flood of homes available for sale

instead you know we kind of had the

opposite everybody kind of

bunkered down and we ended up with way

less inventory on the market and

skyrocketing prices at the same time as

having lower interest rates which just

led prices to skyrocket even more

so now what's interesting is last

march and april because we were watching

exactly what was happening in the real

estate market

on a week by week basis to the point

where i would reach out to some of those

of you

in my real estate agent course trying to

get mls data from different states

multiple different states last

last spring and we're putting together

this data going wait a minute

we're not actually seeing more inventory

we're seeing houses sell

faster and for more money which was

really cool that we identified this

really really early

and this is what i always talk about

this on this channel is you gotta

identify inflection points

or changes in the direction of the

market right last spring when we

identified wait a minute

things are getting better in real estate

not worse

this sounds crazy but i bought 10

properties

between march well more like may when my

first closings happened so between may

and september august september when my

last closings happened

i i bought 10 properties in southern

california and

between september of last year and may

june of this year real estate prices

have just gone

it's been parabolic it's been absolutely

nuts it's gotten

unaffordable for folks to buy and so

identifying inflection points in a

marketplace is

really really really important and i'm

going to talk about a new inflection

point that i'm seeing

now now i do always want to remind you

that in my opinion

i'm a big fan of always buying real

estate below market value

now that gets a little bit confusing

because it's like wait a minute what

does

below market value mean in reference to

what we've got going on

in the market so we'll take out never

mind we won't take out the whiteboard

because

i gave all my markers to my children and

i don't have those markers right now

so instead we'll go on over to the

electronic whiteboard okay we'll go on

over to this

so remember what you want and this

becomes very important for understanding

the inflection point coming up

what you always want to do when you're

buying real estate is you want to find

that the market you know which goes in

cycles this is the real estate market

you generally want to figure out how can

i buy real estate here

so it really doesn't matter where you

buy it just matters that you are getting

into owning real estate but you're doing

so buying

somewhere around 15 to 30

40 under market somewhere in that range

it doesn't have to be

you know insanely under market value but

something under market value

gives you buffer that way if you needed

to turn around and sell quickly you have

more equity if the market falls

you're less likely to be super duper

upside down

you buy under market value you put less

money down sometimes it's as if you put

twenty percent down when you really only

put five percent down

because you're buying something under

market value and i know a lot of folks

might say oh but kevin that's so hard to

find today

it's out there i'm actually just now

finishing the renovation

on yet another property that i bought

for

575 000 in a neighborhood

that's now worth about 710 000 and we're

putting about 40 000

worth of work into it doing our usual

rental grade

formula which our rental grade which we

talk about in the real estate investing

course the property management and

rental

renovations course is really really good

if we've got a very high standard for

our tenants and our properties

and this is why we've never had an

eviction which is something we also talk

a lot about in the programs which you

can get 40

off on linked down below with that

coupon code okay so

this is always the plan the plan is

always buying properties below market

value we

know that and we know we get properties

under market value

and generally when the bones are good

your plumbing your roof your windows

your foundations when these structural

expensive components are good but the

properties covered up with

old stinky carpet mold lead-based paint

acoustic ceilings old kitchens old

bathrooms

things that don't look pretty what you

want is you want the ugliest cosmetics

and the best bones we know this so your

goal is always buying below market value

now generally this is where i leave

the discussion when we talk about buying

but

nuance also matters when we get into

market analysis

because ideally even though you might be

buying

at the top of the market it's nice to

buy under market value

if at all possible don't buy at the top

of the market right

you want to identify possible inflection

points

in what's going on in the market and

that brings us to

what we have to potentially show today

and so i'm going to go ahead and pull

this up this is the redfin data center

which you can use as well

and as somebody who's regularly looking

for inflection points in the real estate

market

this is something that does concern me

especially since lauren my wife and i

we're right now in the process of

considering buying another property i

told lauren if tesla went to 750

in april we'd be able to go house

shopping it went to 750 for like two

days and then fell right back to 666.

i should have set a rule that was like

it has to stay there

i didn't do that but anyway we're also

going to be smart with i'm running

because lauren

understands the market cycle the real

estate cycle as well

and i'm always looking for inflection

points

and i'm identifying an inflection point

that does

sometimes happen around this time of the

year but it's happening a little bit

more

sharply at this point and so take a look

at this this is the redfin data center

and this sort of gives you weekly data

as to what's going on you could change

the duration of one week four weeks

whatever what you're really looking for

is the orange line here the orange line

is uh is is your line for 2021

and that is right here where my mouse is

in case it's harder to see it's this

line where my mouse is right here

and you can see that the red line here

which had a very very odd sort of shift

here

that was a line from uh 2020 when we all

of a sudden had a huge

drop in the amount of available homes on

the market and this makes sense because

nobody really wanted to suddenly sell

their homes during a pandemic

and have people coming into their homes

in the middle of a pandemic

when who knows what people are going to

bring into your home right that was the

thought then

so now i want to show you where i'm

identifying a little bit of an issue

because this this is normal this is to

be expected

everything's operating well here we're

having a similar amount of new listings

on the market

as we have had in 2019 and 2018

which is worth mentioning because a lot

of folks are saying oh my gosh i can't

find any properties well we're having a

similar amount of properties hit the

market

problem is we just have more buyers

similar amount of homes coming on the

market just

more buyers means less available for you

right

all right let's go over to pending sales

pending sales

is when properties go into escrow this

is when properties

actually go under contract and so this

is where we see our first inflection

point specifically what you want to pay

attention to

is right here the fact that in four

little bubble clicks here

we've actually lost about 10 percent of

our pending

inventory much sooner than we usually

lose 10

of our pending inventory 10 declines in

pending inventory usually occur around

the time

school starts which you can see that

here in sort of a normal school year

this is 2018 and 19 right here normal

year

non-pandemic time you get a decline in

sales here

we didn't actually start having about a

10 decline in pending sales

until the end of november when covet 2.0

was really

well not really covert 2.0 was it was

deemed to be the second wave right now

2.0

the second wave was sort of taking over

we didn't really see that decline in

2020 here

but let's get rid of 2020 just to make

this a little easier to look at

and let's just compare 2018 and 19

to 2021 and look how quickly this

inflection point of a reduction

impending inventory has occurred

at the same time we're seeing median

home prices especially newly listed home

prices

actually skyrocketing take a look at

this usually

in the summer months you see inventory

or existing inventory

lower their sales prices so they can

sell before the school year begins

so you see this selling median

listing price over here you're actually

seeing the opposite happen

you're seeing people asking for higher

and higher dollar values on their real

estate

and prices are way higher you're like 20

percent higher than

where you were in 2019 and 18 which is

crazy right

we can even throw 20 20 into here just

to sort of compare since obviously you

did have some growth from 2019

to 2020 but anyway you're still much

higher in median

listing price but what's very odd is

that rather than seeing a decline in

prices in the summer as folks are trying

to clear out their inventory

what do you have you actually have

prices that people are asking for

going up at the same time you have the

same

number of new listings hitting the

market but

buyers finally are saying enough

is enough folks this is something to pay

attention to

as soon as buyers start saying that's it

i'm out which is what we're seeing here

you start getting a stagnating of

inventory and a building up of inventory

sitting on the market

now it's going to take probably another

60 days to really see

is this trend going to flatline or is it

going to continue

if pending sales in my opinion plummet

below the 2018-2019 line because all of

a sudden we inflect downwards

and we get to lower pending sales that

means we're going to get

fewer homes sold in the second half of

this year

than we have had in prior second halfs

of prior years

especially since the usual trend is to

go down if this trend

continues to go down then all of a

sudden we potentially see those prices

finally stop

going up which is an opportunity however

it could also lead to a little

nervousness in the market

now going back to our market value chart

here which we know

real estate goes in cycles personally

seeing this kind of inflection point i'm

not super excited

about looking for wedge deals right now

just not exciting

i've got projects i've got things i can

renovate

but i don't really care i'm not jumping

up and down

trying to look for wedge deals and now

that i'm and again i've got plenty of

renovations going on so i've got enough

going on

but this year particularly not very

excited about seeing in the real estate

market

that potentially we are seeing a

slowdown in pending sales

because asking prices have gotten

ridiculous buyers are saying enough is

enough

this means that potentially we either

see listings

back up and all of a sudden we get a new

sort of

splurge of inventory in other words like

less homes are selling so more homes set

on the market

and as more homes sit on the market

prices start coming down so that way

people start actually selling these

listings

and potentially we start getting a

little bit of a down correction of real

estate to where hey prices can go back

to reasonable levels

we get back to an equilibrium where

there are enough listings to meet buyer

demand

buyers who have left the market come

back in when prices are a little bit

lower

hey maybe there'll be an opportunity

towards the end of this year or end of

next year

now keep in mind the interesting thing

for timing as a buyer

is if the real estate market starts

trending down

and you want to try to time the market

obviously the ideal

is to time the market where prices have

come down a bit but interest rates don't

go

up yet ideally interest rates don't go

up until the end of 2022

or beginning of 2023 at the federal

reserve which tend to have

the consequence of leading real estate

interest rates to go up as well

now they're not directly correlated but

a thing that you can keep an eye on

is the 10-year treasury the 10-year

treasury lately

the last few weeks here has been falling

substantially that's actually good for

mortgage rates

mortgage rates tend to trend down with

the 10-year treasury

so if prices start softening and the

10-year continues to trend down

hey you know what maybe buyers will

finally have a little bit more buying

power a little bit more leverage power

and at the same time you could take

advantage of potentially a

less competitive market now i know

that's really hard to imagine right now

because the market is so competitive and

for anybody wanting to compete right now

i'd say based on these inflection points

that we're seeing right now

maybe take a little bit of stress off

and have a little bit of patience

now very very important if you do find

a really good deal and it's a wedge deal

and it's under market value and you've

got a good opportunity

do whatever you can to get that deal

shorten contingencies in a safe way

shorten your loan contingencies in a

safe way there are ways to structure the

removal of contingencies

in ways that you're still protected

there are a lot of things that you can

do

to strengthen your opportunity to be the

best buyer possible

a lot of it comes down to communication

as well if you've ever written an offer

and you're surprised that you didn't get

the deal

you messed up or your agent messed up

somebody messed up

you should know whether you're gonna be

getting the deal or not

before you get the call saying you got

the deal or not every good agent

knows what i just said is true because

it all comes down to proper

communication with the other side

and if you're not getting the

communication probably means you're

offering good enough

so a lot of things to think about much

like how i talk about the psychology of

money in stocks i do that as well with

real estate check out my programs linked

in the description down below you can

get 40

off with the coupon code down there and

folks we'll see in the next video

but pay attention to this this is a

shift thanks for watching

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