The Housing Market is about to Flip | Urgent

everyone meet kevin here should you wait

to buy real estate since obviously the

market is crazy we've got a whole list

of december reasons why we're going to

have a stock market sell-off that'll

continue throughout september we believe

that when interest rates go up then

obviously home prices must come down

right because it's more expensive to own

a property so therefore prices should

come down well in order to determine

whether or not you should wait to buy

real estate let's watch this video and

pay attention to two very important

things first number one is current price

action what is actually happening and

what are the trends telling us about

home prices and the second thing is the

bond market what is the bond market

telling us about interest rates and

specifically the trajectory of mortgage

rates the answers are in this video now

before i go into those two things that

actually matter let me quickly tell you

what does not matter foreclosures going

up and evictions going up these are old

news bits of information that a lot of

click-baity fear-mongering channels are

trying to share about real estate

suggesting that the real estate market

must be getting ready to come down soon

because obviously if foreclosures are

going up and evictions are going up

we're basically 2008 all over again but

if you actually compare the data to

prior to the pandemic we are at

substantially lower levels of

foreclosures than we have ever seen

before but prior to the pandemic

certainly at least within the prior 10

years before the pandemic and before the

great recession we're at substantially

lower levels of evictions and it makes

sense that they've started taking up

because you can actually have

foreclosures and evictions again they're

not banned across the united states

anymore most people who are currently in

mortgage forbearance as well that about

1.4 million households first of all if

they even all put their properties on

the market for sale and just dumped out

of real estate it might be like a 10

headwind wouldn't be a big deal but

they're unlikely to do that because they

probably don't have to they can take a

loan modification or they could do a

40-year mortgage instead of a 30 they

could stay in their home or quite

frankly even if they did sell they'd

probably just look like a regular sale

because they're way up on their home

value so mortgage forbearance

mortgage foreclosure foreclosures and

evictions not really the catalyst that

we want to be paying attention to we do

want to keep a little bit of an eye on

homeowner debt we're starting to see a

little bit more use of cash out

refinances than ever before as people

are taking money out of their properties

to supplement their income or supplement

their investing strategies elsewhere and

this can sometimes be a little bit of a

red flag we don't like seeing debt

levels go up but so far we're nowhere

near the levels of debt we've pretty

much ever seen in the past so household

balance sheets are pretty strong so

we're going to go ahead and put on the

shelf evictions and foreclosures don't

do those don't matter as much we're

going to put on the shelf people doing

more cash out refinances than you than

we've seen during the rest of the

pandemic the good news is these are

still qualified loans the average credit

score is well over 760

for loans being done right now and folks

have the ability to repay so we're not

seeing the typical run-up to any kind of

mortgage crisis or meltdown so we're

gonna put those things aside now let's

get to the actual meat of what actually

matters and that's price action and what

the bond market is telling us number one

let's go ahead and take a look at this

first what you're going to do is you're

going to look for blue lines and gray

lines okay right here blue line

represents 2019 home sales and gray line

represents 2018 home sales and what it

represents is the year-over-year change

in price so for example right here the

median home sale in 2018 right around

february 18th was 247 000

and you could see this go up from the

beginning of the year to the summer to

about 273 000 and then a summer just

like in 2019 in a normal year you get a

peak around the end of may beginning of

june and you start seeing home prices

come down until you get to about the

very last bit of the year the last four

weeks of the year where in 2018 you were

flat and in 2019 you saw a little bit of

a tick up in home prices in the last

month now kovid had screwed everything

up our usual march to june selling

season actually had this big hole right

here this is divot that's our coved

lockdown divot and that ended up leading

home prices to continue going up for the

rest of the year rather than seeing that

typical seasonal slowdown so ignore the

red line because it's coveted and it's

messy let's instead look at 2021 home

prices did their usual january somewhat

slow down here home prices then started

taking off in february they took all the

way off until about guess what the first

week of may and first week of june very

very predictable real estate prices

capped out at about a median home price

nationally of 359 000

what happened then well we didn't have

covet again sure we always have little

concerns about covent now but we didn't

have big coveted lockdowns again so we

saw our typical seasonal slowdown in

real estate prices real estate prices

fell from about 359 to about

350 000. that's about a two and a half

to three percent drop now this was

seasonally expected we were expecting to

see that kind of slowdown but what we

were not expecting was to see prices

start going up in the middle of

september look at that bucked trend we

net we don't see that in 2018 or 19 but

we see it here in 2021 2021 home prices

went up from their low of 350 back to

360 and they're still trending up right

now this is very interesting because it

means that homes are actually getting

more expensive they're not getting

cheaper when you couple this with the

fact that we're not seeing an eviction

crisis we're not seeing a foreclosure

crisis we're not seeing a forbearance

crisis

and yeah people are taking out a little

bit more debt but we're still not seeing

excessive levels of debt we're seeing

ridiculously high levels of homework or

equity

we're not really potentially setting up

for any kind of real estate crash or

downturn in real estate prices with the

exception of rates

interest rates are the largest potential

risk to

the real estate market that's because

every one percent that you have home

prices or sorry interest rates go up you

usually see home prices fall about 10

that's because home purchasing power

gets eradicated by about 10

for every 1 interest rates go up this is

now leading individuals to say well wait

a minute jerome powell is expecting to

finish his taper three months earlier

than expected he's expecting to raise

rates potentially as soon as march or

april to combat inflation if he raises

the federal funds rate isn't that going

to push up mortgage interest rates

because if rates go up that means rates

go up right

not necessarily so mortgage rates tend

to closely follow something known as the

10 year treasury yield the 10 year

treasury yield not the 30 year

ironically they tend to follow the 10

year and what we're going to do right

now is we're going to look at some of

the bond charts to try to understand

what the heck is going on so the first

thing that i'm going to show you is i'm

going to show you a chart of the two

year treasury yield this is a short term

bond and you can see here in october

november as anxiety has mounted over

jerome powell potentially raising

interest rates you could see that the

two-year treasury yield has gone from

somewhere around 0.22 in september

all the way up to uh more than double of

0.55 on the two-year interest rate

but we usually don't see real estate

denominated by the two-year instead we

see real estate denominated by the

10-year even though we're talking

30-year mortgages 30-year mortgages tend

to follow the pattern of what the

10-year treasury market is doing they're

not necessarily exactly correlated but

they tend to look correlated

take a look at this folks

as jerome powell's

statements over this last week have

scared the stock market 10-year treasury

yields have actually

fallen we've fallen from about a high of

about 1.68

to 1.4 today

this means we should see mortgage

interest rates actually starting to

trend down

and if we do a chart of mortgage rates

30 years and we just do a very quick

google so that way you just like me can

find a non-biased source we run over to

something easy like google take a look

at this

look at the end here after jerome

powell's

rug poll essentially of the stock market

suggesting that hey we're going to end

the taper sooner and we might actually

end up

leading interest rates to go up sooner

we've actually seen

30-year fixed-rate mortgage rates come

down so this actually means that as

jerome powell is getting more hawkish

interest rates on mortgages are actually

going down

now what's really weird about this is

jerome powell is suggesting we're going

to print less money we're going to buy

less bonds

well wait a minute if jerome powell

prints less bonds

then that means there's less pressure on

bonds which means the prices of bonds

fall

which means yields should go up

which means interest rates should go up

so interest rates should be going up

because jerome powell is not wanting to

print as much money to buy as many bonds

but mortgage rates are actually going

down

why is this happening

and what does it mean for real estate

well here's my belief

my belief is that you are seeing shorter

term debt like two-year treasury yields

go up because over the next two years

we're going to be combating higher

levels of inflation

however you're seeing longer-term debt

like mortgages

or 10-year treasury yields go down

because once we combat inflation over

the next two years

we won't have an inflation problem

anymore in the future

we might actually have more of a

deflation problem

and boom

rates in the long term go down which

means mortgage rates could actually go

down

which means if you're waiting to buy

real estate

you might actually end up paying

more for real estate in the future than

you would today

how freaking crazy is that and if this

whole video was a little over your head

or under your knees

you better make sure you invest in

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money and in total summation

it's worth noting that while short-term

yields look like they're going to go up

because of jerome powell's actions

longer-term yields are going down which

means the longer-term trend for 30-year

fixed-rate mortgages should actually be

down not up

crazy world we live in check out those

programs linked down below thank you so

much for watching and folks we'll see in

the next one goodbye