The Housing Crash **JUST** STARTED.

we've got to talk about the housing

market because we've got some massive

problems a little bit of good news but

some massive problems and some cracks

that are showing and in this video i'm

going to show you some things you

probably haven't seen before so let's

talk about what's going on with the

housing market and then potentially try

to understand why it's happening and

maybe cast out how long do we think this

pain could potentially last for the

housing market when would it begin first

of all then when we actually think it's

going to end and where the opportunities

to buy or sell or refinance real estate

let's get into that

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folks so the first thing that we've

really got to pay attention to with real

estate has to of course do with

inventory because we know that inventory

is at substantially low levels but what

we're concerned about is the potential

fear okay this is very hard to quantify

but this will make or break the real

estate market and so that's why i'm

going to start with this

the thing that you have to be concerned

about

is people who own real estate getting

fearful that prices are going to come

down and then deciding to sell their

real estate that is the most important

distinction now when people hear that

they think oh but wait a minute kevin

but if you sell then you have to rebuy

wrong

if you're a homeowner and you sell

you could

rent

also you don't have to be a homeowner to

sell you could be an institutional owner

of real estate or you could be an

investor in real estate and we don't

need a hundred percent of people decide

do we want to sell or not what we really

only need is maybe an additional 1

million homes or maybe an extra 10

percent of homes to sell and all of a

sudden you have a completely different

inventory dynamic than you previously

did so one of the first and in my

opinion most important leading

indicators of pain coming to the real

estate market is what's happening with

new listings now this is market by

market i'm going to show you where you

can look this up this is very early so

we're not going to get crystal clear

data yet but you want to pay attention

to what i call inflection points in the

real estate market you could do this

with your local mls by talking to your

real estate agent or you could just use

the redfin data center just know that

the redfin data center is about two to

three weeks delayed so if you want

accurate week by week information you

should talk to your agent about this

but take a look at this you go to redfin

data center at first glance you don't

really notice anything scary

because if you go to new listings you

don't notice anything that is breaking

trend and what you should do when you

look at this trend is you should uncheck

the 2020 box because we want to compare

to 2021 19 and 2022. there's there's too

much noise in 2020 and that makes sense

but where what you want to be watchful

of is when you start seeing stuff like

this go to a hot market like austin

texas

very hot real estate market austin

labeled the number one place to live in

america by multiple different magazines

people flocking there from california a

lot of really incredible bullishness on

austin what do you notice here

an above trend break in new listings

and this is something that we should be

concerned about in terms of starting to

pay attention to because this is a four

week line

which means it's kind of like a moving

average it's not an exponential moving

average

it's a four-week moving average which

means for you to break trend this

substantially on a four-week smoothed

out line your latest data points have to

be substantially higher

and that is a trend that you want to

start paying attention to when you start

seeing these new listings in various

different cities break trend break trend

break trend break trend

that's when you start getting concerned

this is not happening broadly yet but

you're starting to see some of the

inflection points and again it's a four

week moving average so it really is

going to take some time but it's one of

the first things that we want to start

paying attention to what's another

leading indicator for problems in the

real estate market ah yes well another

very popular leading indicator are new

home sales new home sales are really

unique because new home sales are

tracked based on when

homes go under

contract whereas regular

resale homes are tracked when they close

so that actually means if you want to

get more recent data about the state of

the market now

you look at new home sales

and let me show you the estimates for

new home sales from the prior

from from the prior month we were

expecting

to get somewhere around 750 000 new home

sales this chart you're gonna see right

here

is the spread

of expectations for new home sales so

when i hide myself here this shows you

that right here this was sort of the

average estimate that new home sales

were going to come in at 750 000. some

people thought it was going to come in

at say 7.65 some people thought closer

to 700 000 in new home sales but

everybody was pretty convinced that we

were going to be somewhere over here you

can see the bell curve right here of

estimate puts us somewhere about 745 000

right

look at where new home sales

actually came in and this is absolutely

mind-blowing and i do want to say

because i see the question

yes my programs on real estate do help

internationally as well 90 of the

content applies you'll have to make some

adjustments for taxes and loan types but

the real principles of building wealth

are going to apply to all markets

especially in terms of like how to

renovate and things like that

now

take a look at this this is scary this

is like oh crap this is where new home

sales actually came in

way over there

at 588

000

nobody was freaking close

it's such a bad freaking miss that you

literally have

the analyst writing

yesterday we saw a horrendous new home

sales number nowhere near expectations

and at uh at the number the lowest

reading since april of 2020

this may be the beginning of a trend

okay we need to talk about that we need

to talk about april of 2020 but i need

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okay let's go back for a moment to

not that to this right here

okay also not that one of these buttons

there we go let's go here

so when we talk about this being the

worst since april of 2020 why was april

of 2020 so bad well april of 2020 was

uniquely interesting because everybody

we locked down and everybody had a

substantial fear that the real estate

market was going to face a wave of

foreclosures and that the market was

going to crash

that did not end up happening because we

ended up getting mortgage forbearances

and people were essentially able to not

make payments on their homes for up to

18 months

take that extra money add it to the back

of their existing loan and then

potentially refinance the other the

entire loan from a 30-year mortgage to a

40-year mortgage which means you have

actually lowered your payments

now foreclosures are a big concern and

this is where a lot of folks ask me

kevin are we going to see a wave of

foreclosures like we had in 2008

i believe the answer to that is no

that's because the average credit score

of a buyer in 2008 was 670.

the average credit score of a buyer

today is a hundred points higher in the

range of 770 that makes it much more

clear that the people buying homes today

are your wealthier demographic and we

know that wealthier demographics right

now actually hold substantially more

cash and therefore more purchasing power

and more of a buffer than the lower

income demographics that we that we have

you can see on screen here top 20

percent of substantially more household

income than the bottom 80 percent of

individuals it's also worth noting that

the typical net worth of a homeowner is

somewhere in the neighborhood of a

hundred seventy to a hundred eighty

thousand dollars the typical net worth

of a renter is about five thousand

dollars so first of all that should be a

hint to you that you should absolutely

get into home ownership definitely check

out the programs on building your wealth

real estate link down below if you're

clueless as to how to even get started

real estate or maybe you know a lot

about real estate and you're like okay

maybe i can learn more you can

will we see a foreclosure crisis though

the answer in my opinion here is a solid

no i don't believe we're going to see a

substantial foreclosure crisis and

foreclosures even though they're up from

year over year numbers where we had a

foreclosure moratorium and this is why

you have to be careful about foreclosure

click bait that we see online it's

people like oh my gosh so many more

foreclosures than last year well yeah

well we had none last year we're still

at about half of the levels of

foreclosures now than we had prior to

the pandemic

the reason for this is thanks to the

ability to repay rules and dodd-frank

regulations it's very difficult now to

qualify for a home and generally it's

the higher income demographics who are

qualifying for homes those are the

people with more cash and who are more

resilient to inflation because they have

assets now does that mean that real

estate prices are going to keep going up

well my opinion not necessarily just

because we are not necessarily going to

have a wave of foreclosures does not

mean that in my opinion we are going to

see the real estate market get out of

this economic slowdown scot-free in fact

lowe's gave us a little bit of insight

into their research they told us that

they believe we have at the moment or or

at the first quarter of the year we have

somewhere between 20 to 28 percent

excess demand

uh for homes

that is the opinion of lows and it could

be anywhere in that range

interest rates have gone up about three

percent for the average buyer since the

lows that we had maybe somewhere between

two and a half now because interest

rates have slightly ticked down again a

little bit but we think that as soon as

the federal reserve starts their

quantitative tightening we're actually

going to see treasury yields increase

even more than we have previously and we

could end up having those six percent

mortgage rates again quantitative

tightening starts june 1st of 2022 and i

wouldn't be surprised to see the 10-year

treasury rise once we actually start

having waves of tightening and we're not

going to have our most severe tightening

until three months after june which is

actually september 1st that's when we're

going to start seeing our more severe

tightening where we're really tightening

to the tune of 95 billion dollars a

month

but anyway

every one percent that mortgage rates go

up we know that buyer purchasing power

goes down by about 10

well if interest rates have gone up two

and a half to three percent then that

means all of this excess demand in the

range of negative 20 to negative 30

percent

is probably going to weigh and eliminate

all of the excess demand so maybe where

now at these higher rates we actually

have a stable market or a market where

prices might be prone to come down about

say five percent right roughly in the

middle here making an estimate maybe

that means prices come down at the end

of the year by about five percent well

that's nominal that's not a reason to

sell right and it's also difficult to

refinance right now because rates have

gone up so high

probably a better thing to do is getting

like a home equity line of credit

because those are usually variable

interest rates and so when rates come

back down those will come down again

which i suppose you could do with like a

larger refinance as well if you wanted

access to capital but in my opinion now

is not time the time to buy the time to

buy is once we figure out what direction

the real estate market is going to go in

i personally think best case scenario

we're somewhere between a zero to

negative five percent decline by the end

of the year because of excess demand

getting crushed via interest rates

solely however folks

what is

and and well let me finish also the

thought that should you sell probably

not because it's going to cost you

somewhere between 7 to 10 percent to

sell that's because you've got real

estate commissions of between four and

five percent you've got escrow and title

fees of somewhere about one and a half

percent you're probably going to set

aside one to two percent in repairs

you're gonna have vacancy costs uh all

that stuff adds up to about seven

percent in selling costs so like selling

real estate is expensive like if you

have to pay a tenant to get out that

adds to the cost as well all that stuff

is expensive so like if you're selling

real estate you're giving up seven to

ten percent

so probably not a good thing to sell if

you only think prices are gonna come

down zero to five percent do we think

they're going to come down 40

no

like no i don't think we're gonna see a

2008 again because we have a different

quality of borrower so what is the the

the thing that changes everything

well it's this right here it's what we

started with it's inventory if

inventories

like if excess demand has been

eradicated because of rates but then

inventories skyrocket

problems

that's when you get actual problems and

that's in my opinion where you could see

a real estate decline uh anywhere in the

range

of

negative 10

to negative 25 that's my expectation

somewhere in that range nowhere near

that 08 level this would really like 25

this would really take a panic of like

tucker carlson going oh my gosh real

estate's plummeting this that whatever

investors starting to dump trying to

like sell at the top or whatever right

that's that 25 fear

that 10

is probably in my opinion my base case

scenario that we're going to see about a

10 percent

sell sell down which means if you sell

costs you 10 to sell you you kind of

like broke even

right uh depending on of course when you

sell so those are my thoughts for the

coming real estate crash and if you want

to dialogue with me or me look at your

deal or kind of talk about that check

out the programs on building your wealth

a link down below especially those real

estate ones and do remember that

i think there's a high likelihood of

inventory being the driver of these

moves so pay attention to that inventory

statistic watch what the 10-year

treasury does when we start seeing the

tightening cycle and you're going to

know a whole lot more about what's

coming to the real estate market my

thoughts thanks for

watching alright

what