Revealing the Truth | How Bad the Housing Crash will Get.

hey so there's been a lot of talk about

the housing market potentially

collapsing 30 to 50 and in this video I

want to give just sort of my real

perspective in terms of do I actually

think some kind of 30 to 50 percent drop

in the housing market is realistic are

all of a sudden homes actually going to

be affordable to the point that average

everyday people are actually going to be

able to afford real estate and what's my

take on all this well in short no I I

don't believe that housing is going to

have such a catastrophic downturn I do

expect that housing has vastly peaked in

May to June and now we're starting to

see institutional investors across the

board pull back not only are home

builders starting to cancel land

contracts and pulling back because they

see the macroeconomic headwinds but

they're also sort of evaluating hey like

why spend money on housing when we could

just buy back our stock which is

relatively cheap but you are also seeing

home rental companies like Invitation

Homes finally slow down now they should

have pulled back in q1 of 2022 which

which is one I advocated for potentially

if you wanted to get out of peak selling

real estate and waiting that that cycle

out which is also what I did with my

real estate portfolio however Invitation

Homes still ended up spending about two

uh sorry one 1.1 billion dollars on

rental homes buying about 2 000 rental

homes between January and September 30th

and now for the last three months of the

year they expect to spend virtually

Nothing On Homes I think somewhere

around like 70 billion dollars almost

nothing relative to what they have been

spending uh and that's kind of shocking

because it shows that Invitation Homes

the largest one of the largest rental

home rental companies in the country is

saying oh crap we probably should have

slowed earlier now we're definitely

going to slow and we're going to wait

for opportunities now in their earnings

call which we talked about this morning

on our course member live stream which

of course we have a Halloween coupon

that that ends today uh check that out

down below before we get into November

the the interesting takeaway really was

that Invitation Homes isn't trying to

time the market they're not trying to

perfectly time the bottom or the top

here they're just trying to say look

we're going to pause and we're going to

wait for better opportunities and then

we'll sort of average in but they're

making it very clear that that time is

not now that now we are just beginning

the housing downtrend and this is what I

think is so interesting is that really

do we really think that housing prices

are going to collapse like they did in

2008 where we had subprime lending and

uh you know ninja loans where people

couldn't qualify for loans but they were

getting approved anyway with teaser

rates of negative interest rates that

ended up adjusting six months later with

the hope that people could refinance but

then they couldn't so they ended up

going bankrupt or into foreclosure

complete disasters right that makes

sense it makes sense to see a 40 to 50

real estate decline when people are

selling their homes through short sell

and foreclosure because they have to and

they don't actually care what the homes

are selling for in fact I remember being

a real estate agent back in 2010-11 and

people would say what do I care what the

property sells for just get the property

sold because the bank is giving me a

short seller benefit for going through

with a short sale they were giving

sellers ten thousand dollar checks just

to say here have ten thousand dollars

thanks for going through the short sale

process here's some money to move this

saves US money not having to go through

the full foreclosure process and even

though you're basically dumping on the

property and you're trying to sell this

property for as little as possible

here's a thank you check for ten

thousand dollars for helping us sell

this property quicker for less like the

incentives were so perverse in the last

recession that it makes sense home

prices fell as much as they did but

credit quality is so much stronger today

average credit scores are a hundred

points higher than they were back then

people have to have the ability to repay

the amount of equity people have in

their homes is substantial even if

property values fell 15 10 people would

still have Equity who bought after the

pandemic let alone the people who bought

before the pandemic who have even more

Equity than those who bought since the

pandemic right so we're really not

seeing the potential for the short

seller and foreclosure Crush but we are

definitely seeing a Slowdown that

finally institutions are recognizing

including Invitation Homes and saying

okay yeah we do actually need to take a

little bit of a pause here and stop

buying so where could we actually and

potentially see some pain coming from

like where can we actually see housing

inventory increase because so far we're

really not seeing housing inventory

Skyrocket even though sales are falling

which means that we're seeing the

month's supply of homes go up actual

housing inventory isn't really

skyrocketing and so this means in order

for us to really see a downturn in the

real estate market beyond the same to 10

percent we've already seen in markets we

really need to see the following happen

we need to see investors bail and right

now we're not seeing that right now what

we're seeing is uh there we go we were

seeing nothing there for a second we're

seeing investors

pause right so we have investors pausing

we need in order to see prices go down

if you want prices to go down

substantially we need investors to bail

now these investors could be Pension

funds they could be uh Mom Pop investors

they could be institutions like

Invitation Homes right but really what

you're seeing is you're just seeing

these investors pause and not only are

they pausing their Acquisitions but

they're pausing home builds which

ironically uh investors pausing

Acquisitions uh could be offset by a

Slowdown in

new housing over the next few years

right because new housing takes time so

you really need to see home prices

probably extend past 25 declines you

really need Panic here now is it

possible that we could get to panic yes

it is see we know that real estate has

roughly peaked uh in about March to May

so the real estate cycle somewhat looks

like this right now where this is your

Peak over here somewhere between month

three to month five depending on where

you are in the United States is roughly

where you saw your Peak and we've come

off of this peak maybe six to eight

percent already but where we are now

when we look year over year to last

October we're still actually about eight

percent higher than where we were so I

believe in order for us to see real

potential Panic we need to see these

years year numbers be negative which

we'll probably see when we're actually

comparing May of of next year which let

me draw that in Orange over here it's

getting a little crowded May of next

year might be somewhat where this dot is

over here and that'll actually compare

here and that's where where you're going

to see maybe this negative 10 Decline

and potentially then then you get this

rotation of oh crap it's not homeowners

who are going to sell because then they

have to move into potentially a higher

interest rate so a home right so they're

more incentivized to stay put but it's

potentially people with extra real

estate homeowner like Mom and Pop

investors institutional investors

Pension funds that say oh crap the FED

is keeping rates higher for longer

they're fighting inflation higher for

longer mortgage rates are staying higher

for longer we need to dump

to create liquidity for the stock market

or the bond market or otherwise and by

dumping real estate we are potentially

dumping into a panicked environment

where if you dump into Panic where year

of your home sales excuse me are

negative

that's when you could potentially create

this self-fulfilling movement of fire

selling now that I expect to be

different than 2008 but look here this

was Pulte Homes they literally tell you

in their earnings report we cannot be

margin proud we have to sell homes even

if it means aggressive discounting of

our existing inventory this is painful

and it's really this is where we in my

opinion see Max Payne Max Payne in real

estate comes from year over year let's

write these down Okay so we're going to

write it down together Max Payne in real

estate comes from the following it comes

from we will tab open here there we go

can we'll call it conditions for max

pain conditions for Max Payne and real

estate you need year-over-year declines

we're not going to see those until March

to May 2023 then you need continued fed

pain because that'll create pain uh

painted stocks and bonds when you get

continued fed pain now you get investor

liquidations not just a pause

pause is not going to be enough you need

those investor liquidations there we go

I apparently can't get the spell today

there you go these are the conditions

for really max pain however

these conditions would align with maybe

a 20 to 25 decline in real estate which

I think is substantial this would take

us back to uh or just before the

pandemic so like 2019 so you're not

going to be back at 2011 prices where

you could get that two through that 300

000 home but maybe you could get that

home for six hundred thousand dollars

instead of eight hundred thousand

dollars which we kind of saw in like May

of 2022 right so basically I would see

that as like an 800k home becomes a 600k

home rather than a 2011 uh three hundred

thousand dollar home so affordability

will still be stretched but this is my

expectation for investor liquidations at

the same time as continued fed pain and

year-over-year declines leading to

really a 20 to 25 decline in the real

estate market which really aligns with

about a 45 reduction in purchasing power

due to higher rates

but then also this access buyer demand

of about 20 off setting that difference

between 45 to about 25 because you had

excess buyer demand of about 20 so my

opinion

and we'll see we'll continue to track

this but so far we do not have the short

sell uh and liquidation Panic maybe

we'll get the investor panic but

investors uh won't generally

uh Panic at these levels because it

would be highly unprofitable to do so

whereas short sell Banks don't want to

hold on to inventory but we're not

actually expecting short sales and

foreclosures so again this is where I

get to what I think is sort of your

realistic decline for Real Estate I

think that'll create fantastic

opportunities for house hack and we'll

be utilizing a lot of the technology

that already exists especially like I

mean just this morning we were reviewing

Invitation Homes Rental Management

platform really great a lot of things to

improve on but what a great head start

to see what some of the industry is

already doing and uh and so we're really

excited about househack but but beyond

that do we really think of 2008-2009

real estate crush is coming yet no not

quite yet but probably 15 to 25 yes is

that going to affect then stocks that

relate to uh homeowner Investments Home

Depot Lowe's and phase solar Edge yeah

probably

so we'll see

I would just say for the meantime Buck a

lot and thanks so much for watching

check out those programs linked down

below and happy Halloween