The 2022 Housing Market Collapse | The Truth.

hey everyone me kevin here in this video

we're going to talk about the housing

market i haven't done a housing market

update in a while and y'all know real

estate is my favorite pastime i've got

over 20 million dollars in real estate

personally invested so i got a lot

riding on what happens in the real

estate market i've also got amazing

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program pretty much anyway check that

out link down below let's not talk about

the housing market okay so a few things

we got to talk about all right so

housing headwinds we want to talk about

positives and negatives and how these

things might affect the market so first

of all there's a lot of doom and gloom

about the repo market about how oh once

mortgage forbearance is up everybody's

going to get foreclosed on look i called

this nonsense during the pandemic

because quite frankly it is nonsense

most people going through mortgage

forbearance aren't getting foreclosed on

afterwards they're adding to the loan

they're they're forbeared money

basically to the back of their loan and

potentially they're even refinancing

from 30-year fixed rate debt to 40-year

fixed rate debt effectively lowering

their monthly payment it's kind of like

having a

let's say a seven year car loan versus a

three-year car loan your payment's a lot

less right sam and you pay more interest

over the life of loan but your payment

goes down so really we're not expecting

like a boom in foreclosures from the

pandemic and quite frankly the data is

showing that right now we've had uh 23

203

foreclosure starts in january those

don't necessarily mean that they will

translate into foreclosures but those

have started the legal proceedings

oftentimes when people see foreclosure

they start paying their mortgage so this

doesn't necessarily mean you're going to

get this kind of inventory on the market

but uh this is

this seems like it's up a lot in fact a

lot of the sort of fear mongers like to

say oh my gosh foreclosure starts are at

23 000 they're up from 10 000

foreclosure starts have doubled since

you know and then they'll pick some date

during the pandemic like june or july

2020 when we had foreclosure bans right

i mean you could say oh my gosh we're up

400 from certain periods of time during

the pandemic but this is stupid we

should be comparing two before the

pandemic and we actually have 50 percent

fewer foreclosure starts

today in this january uh of 2022 than we

had in 2020 so way way fewer repos now

we are starting to see some headwinds

for housing starts a lot of this in my

opinion has to do with lumber so for

example the canadian housing market had

uh housing starts fall about three

percent in december

and uh we have a lot of numbers coming

out this friday in the united states

we're expecting housing starts to

actually fall as much as 7.2 in january

in the united states and existing home

sales to come in 1.3 percent on a month

over month decline we're expecting this

decline here so existing home sales

likely to decline this friday and uh

housing starts expected decline quite a

bit part of this has to do with the fact

that lumber's been skyrocketing we just

saw lumber skyrocket 10 in just the last

two weeks alone a cnbc released an

article today talking about how this is

adding about nineteen thousand dollars

to the cost of a home which keep in mind

the median home price in america is

about three hundred fifty thousand

dollars so that's a that's a pretty

pretty penny there i mean that's that's

a big part of the profit margin for a

lot of these companies and lumber prices

have just gone to the moon uh so so here

are some things to consider here are

some other things to consider over here

though is that right now we have 11.3

fewer listings year over year which when

you have less inventory it well less

supply means more demand right and

prices actually get driven up so even

though we're seeing a little bit of a

slowdown in new builds we're not seeing

new inventory from foreclosures and

we're actually selling we're listing

fewer homes compared to 2021 so in other

words that's supportive to home prices

still going up i mean less inventory

it's more expensive to build homes it's

gotten so expensive to build homes we're

actually building less of them so less

inventory again less inventory actually

coming on the market uh and so of course

prices are right now trending nowhere

but up uh we've also we're flat on the

pending sales territory which means we

haven't seen pending sales fall because

of prices going up this would mean well

if we saw pending sales fall it would

mean that buyers are starting to say you

know what it's getting too pricey to buy

we can't keep buying you start seeing

pending sales fall that's a little bit

of a red flag of a market starting to

cool

now we did have eight point nine percent

fewer sales in january though that is uh

also just like this flat pending sales

here this is a little bit of a sign of

potentially a little bit of relaxation

from buyers but it could be because our

supply is lower and that's a little bit

of a problem because not only is our

supply lower but prices are up about

almost 14 year over year so we're not

seeing much movement in pending sales

coming down price is up 14

as a result we've had about nine percent

fewer sales and we're listing fewer

properties and all of this together this

entire little section here together

along with less repos and less starts

and higher lumber prices all of this

means bottom line less

supply and the assumption here is that

this is going to increase prices but

there's a problem and we're always going

to talk about problems okay

what makes prices go down well

mortgage rates so when mortgage rates go

up they put downward pressure on prices

and we've got a little bit of an issue

here okay so what we're gonna do is

we're gonna look at the brown here the

brown shows us what's happened with

mortgage rates just since december 31st

we've gone from a 30-year fixed at about

2.8 to a 30-year fixed at 3.9 percent

and we don't expect this pace to slow

down this has already slowed down the

number of people refinancing homes less

refinances

might potentially lead some folks to

sell but we don't really have a good

correlation there less refinances

usually just means people have less cash

to buy other things like potentially

rental properties which could help

reduce some of the crazy demand we've

seen but could also mean people just

have less money to spend on boats or

cars or clothing or on stocks so we're

seeing refinances decline and this makes

sense there might be a brief surge of

refinances as some remaining people were

like crap i forgot to refinance at 2.8

let me quickly refinance at 3.9 before

we go up to 5

that could happen so there could be a

little brief surge in refinances but

like i mentioned here we're already

seeing mortgage applications fall about

8.1 percent so this is going to give us

even though we've still got this tight

supply this is potentially going to

lower our buyer pool so potentially

fewer buyers here as these mortgage

applications are declining which makes

sense because rates are going up when

rates go up fewer people can afford to

buy now you do still have a lot of

buyers in the process in fact some

buyers who are pre-approved right now

are saying you know what i need to hurry

up and get in

before rates go up even more and this

makes a lot of sense so in the longer

term i'm going to put lt here longer

term you're going to see less buyers but

actually in the short term you're going

to see more buyers so you're going to

have this really weird thing happen in

the short term i expect to see more

buyers with less supply so higher prices

so prices

in the short term because of these

things probably up like if somebody's

wanting to sell a house now they could

probably still do quite well

in the longer term if we get less buyers

well then we get a question mark what do

prices do well it depends less buyers

but still increasingly less supply maybe

those balance each other out but let's

talk a little bit about rate trajectory

so for us to try to figure out where

rates could go we got to look back at

this chart and try to overlay it to what

happened in 2018. in 2018 the 10-year

treasury

went from 1.5

all the way up to about 3

right now the 10-year treasury sits

right here and mortgage rates 30-year

mortgage rates tend to trend with

the 10-year treasury so if we assume

that we follow the same pattern of what

happened in 2018 and the 10-year

treasury rate goes from 2 which remember

it was just 1.5 december 31st it

skyrocketed to 2.04

today and if this goes all the way to 3

then we could reasonably expect mortgage

rates to go to about 5

this is what happened in 2018. now what

implication did this have on pricing

remember in 2018 we didn't have high

inflation we didn't have recessionary

fears right now markets are pricing in

the potential for a 50 chance of

recession over the next year that's

quite substantial we didn't actually

have those fears in 2018 and we had

rates rising in a non-inflationary time

and inflation was like one and a half

percent no big deal it was just a matter

of trying to get back to a normal policy

stance now if we looked at 2018 as the

most recent example of hikes in the

10-year treasury when we last went to

about a three percent 10-year treasury

we know that mortgage rates ran to about

five percent got it so what did that do

in the real estate market well in the

very very short term in the span of two

months real estate prices lost about 12

from their peak in about two months but

that was very very very short term that

was for about six to ten weeks and we

started seeing a rebound so this was

actually really neat because by the end

of 2018 real estate prices ended up

three percent so even though we went

through this this maddening rise in

interest rates there was still so much

demand and enthusiasm and euphoria for

real estate the real estate still ended

the year up three percent and we did

actually start seeing rates normalized

closer to 4.25

to 4.5

now why is it that you could see such a

dramatic move in real estate prices well

because of a rule of 10x see when

interest rates go up

about one percent

we expect that purchasing power tends to

go down about 10

so for every one percentage point

increase in rates purchasing power based

on individuals mortgage their principal

interest taxes insurance and hoa dues

their purchasing power there for all

that together tends to go down about 10

so it made sense that when we saw this

1.2 percent skyrocket in rates that real

estate prices lost

instantly about 12 percent so active

listings had their deals canceled active

listings had to quickly reduce their

prices

and so we saw

some drama in the real estate market and

a lot of this unfolded really between

may and september of 2018 and every area

reacted differently but as an active

real estate broker at the time this was

a very difficult summer

flips were difficult to sell it was very

difficult to sell anything at what

previous properties were selling for

because people just couldn't afford it

anymore

but again we still ended the year up

three percent so the question now is uh

what kind of headwind could we

potentially face and how is that going

to affect real estate for all of 2022 so

what's wild here is this was a move from

3.8 to 5 in 2018 but look at the move we

have right now this delta right here

that's this line right here this

difference

this line right here is a change of not

1.2 percent it's actually a change in

rates potentially

of 2.2 percent

we've already had the jump from 2.8 to

almost four so we've almost had this 1.2

percent bump in the span of six weeks

if we go to a three percent treasury

over the next two months as the federal

reserve starts hiking rates and maybe

potentially more rate hikes get priced

in we don't know if we're gonna hit that

three percent treasury but if we hit a

three percent treasury that would be a

two point two percent mortgage rate

shock uh and that could create a

potential negative twenty two percent

headwind to real estate and so now we

got to come back up here and say all

right in the short term we might see a

lot of buyer demand but in the long term

we might see less buyers in the market

we combine less buyers with less supply

maybe those balance out but do they

balance out to the tune of negative 22

if rates went this high maybe rates

maybe we'll only have that negative uh

that negative 12 percent uh you know

effect to pricing because interest rates

end up staying stable at about 3.9 to 4

percent where they are now that's

possible but if rates keep rising which

folks do expect that they will this this

is the range of our potential real

estate headwind now this doesn't

necessarily mean that prices are going

to end down

12 to 22 percent this year because look

at 2018 2018 we had this 12 temporary

shock and then we still ended the year

positive in real estate prices so this

does not necessarily mean real estate

prices are going to fall but this right

here is a huge headwind to real estate

and we will likely this year see a

headwind of between negative 12 to

negative 22

offset again by the fact that lumber's

more expensive and we have less supply

and fewer people are listing homes so

we've got some good news helping offset

this which is not such good news but

we've got some more problems the fact

that right now we have

an inflation issue in our country and a

wage price spiral that has started which

these issues could lead to a lot of fear

unfortunately in in our economy in

general

if we get fear and spending starts going

down it's likely that fearful folks will

also not turn out to be home buyers even

with slightly higher rates and if we

start seeing buyer demands soften

because folks fear that we are going to

go into a recession you could

potentially see a little bit of a

self-fulfilling prophecy here where

people think we're going into a

recession they think oh maybe now's not

a time to buy a house you see less

buyers and then you actually see these

price drops come to fruition and where

the real fear and panic comes is not

from my video here the real fear and

panic comes from tucker carlson telling

you home prices just went down three

percent in one month and that starts

leading people to wonder oh what's next

but i think that is only in the confl

i'm calling it the confluence of

recession scenario right now the

economy's killing it i mean q4 earnings

for companies were amazing people are

spending money like crazy they're

traveling like crazy disney airbnb

they're killing it sure there are some

signs that things might be settling down

and slowing down a little bit but the

economy is doing very very well the

question is will the economy continue to

do well

if the federal reserve gets really

really aggressive against inflation so

bottom line out of all of this you want

to know the one thing to pay attention

to in terms of what the real estate

market's going to do it's this right

here

that word inflation if inflation

continues to soar the fed has to get

more aggressive if the fed has to get

more aggressive this three percent

treasury becomes more of a reality and

when we get to three percent treasury in

a five percent over here we have a

higher likelihood of tucker carlson

telling you the bad news about real

estate prices and then potentially these

numbers here becoming a reality but

these will only become a reality in the

event that inflation ends up not being

transitory so if the federal reserve can

get inflation down by playing the wait

and see game supply chains catch up

everybody chills out about inflation

okay prices went up and we're good then

maybe things are okay because remember

this about inflation folks if i sell you

this pen

for

ten dollars

today and next year i sell you this pen

for eleven dollars

then we had ten percent inflation right

this was ten percent inflation

well if the year after that i'm still

selling the pen

for eleven dollars we actually had zero

percent inflation

so you really have to have increasing

prices on top of increasing prices for

this real this inflation to continue the

problem is right now

we we are seeing this

so we'll see where things go we're

hoping inflation starts peaking maybe in

february

maybe in march maybe in april if we

still have high inflation by then

these things are going to become an

issue thanks so much for watching make

sure to check out the programs linked

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single day the market is open i will

gladly look at your real estate deals as

well and folks we'll see the next one

thanks bye