The UGLY Housing Crash | Worst 29 Markets Falling Fast

hey everyone me Kevin here by now we

already know that the housing market has

finally hit a peak and it's already been

rotating down nationally to the tune of

about five and a half percent and in

specific areas as much as 11 to 12 since

uh march to May when we kind of saw real

estate in various different markets Peak

some markets peaked as early as February

and in this video we're going to break

down specifically which areas are

starting to be affected the most and

what's fascinating is the most common

question that I've been getting lately

about my real estate startup is Kevin

where are you going to buy properties

and the answer is well we have an idea

we are looking at data just like this to

try to understand where the biggest

opportunities might actually be coming

from so the reason we're not committing

to something yet is because the real

estate market is just at the beginning

of its decline but we're all ready to

starting to see some big highlighters in

certain cities and that's what we're

going to talk about in this video keep

in mind generally and this is very

generally speaking the way you can

determine a real estate bottom is the

following ways number one inventory

rather than skyrocketing starts rapidly

declining right now we're in the phase

of building inventory so as you see

inventory building you tend to be closer

to a top of a market or maybe in uh you

know there could be seasonal effects of

the year as well but generally when you

see inventory go up you tend to see

prices come down now if you see price

reductions the percentage of listings

with active price reductions going up

then you tend to also have a sign that

you're towards a top of a market rather

than the bottom of a market the opposite

happens at the bottom of the market

bottom Market you tend to see price

reductions plummet that is less price

reductions are required to see prices

actually go up again written for

properties to sell and then of course

with this one is a little bit more

lagging you can keep an eye on median

home sale prices the best way to

determine a bottom though in my opinion

is by actually being in a market

regularly so for example with my real

estate startup house hack I'm going to

have to be in three to five markets and

be consistently in them talking to

agents every single week about what's

going on in the market and visiting

those markets throughout the United

States so that way I know oh here's a

housing track and we're seeing three

bedroom two bath thirteen hundred square

foot models sell for less less and less

every single month then we know okay we

haven't hit the bottom yet but when we

start seeing the leading data okay and

this is like a big secret like only

somebody in the real estate industry

would be able to tell you this because

the reality is there are a lot of people

who just sit behind the camera or you

know sit around at home and don't

actually go and physically do anything

and then you wouldn't know this real

estate is a people business and when you

start seeing the Realtors telling you at

broker tours or on the phone when you're

talking about what's going on or in

person at meetings hey we're starting to

see more activity hey whoa instead of

property sitting on the market for for

30 days before getting an offer we're

starting to get offers in 20 days or in

10 days or in two days after listing hey

we're starting to increase our listing

prices with Sellers and we're starting

to get those you can get a three to four

months a month advantage on when the

housing market is actually bottoming

because you're actually paying attention

to the market significantly better than

anybody else is paying attention to the

market I would rather know that pending

home sales are going in for higher

values at the bottom of the market then

wait three or four months for the

National Association Realtors or Redfin

or whatever to give me some kind of

sales or sold data then you're too late

right anyway this information we're

going to look at here is a form of

leading information about the housing

market slowing down and it gives us some

insight from home builder Lennar who has

three categories of housing markets

suffering Decline and they just came out

on September 22nd at the end of

September 22nd with a new update in

terms of what the heck is going on in

the market so let's go ahead and look at

their introduction first and then we're

going to go into the specific market so

intro here obviously we know that

housing has now been quote considerably

impacted by more than the doubling of

mortgage rates we saw this coming

there's a reason I said since January we

got to be careful like housing's about

to get destroyed and everybody thought I

was crazy that no way Supply is way too

tight it'll never go down yeah right

just buckle up it not only has it

started going down it's going to

continue to go down my expectation now

uh then we have a note over here that

while there is still a housing shortage

across the country and we're not

expecting to see a foreclosure or

Speculator crisis kind of like we did in

2008 where you had a bunch of short

sales and foreclosures we are seeing

prices go down and incentives basically

being increased now this is really

important and it's part of the

psychology that I teach in the programs

in building your wealth linked down

below but you got to know this when a

home builder sells a property for 500

thousand dollars and then the next home

that they finished construction on it

comes up for sale for four hundred

ninety thousand dollars guess who they

just pissed off they just pissed off the

prior buyer and the prior buyer feels

like they got reamed like they got a bad

deal right so generally in new

construction homes and we specifically

talk about this in the zero to

millionaire course for real estate

investing there's also a do-it-yourself

property management and Rental

Renovations course so that way if you're

clueless about real estate you can learn

everything from zero to millionaire what

it takes to get there and honestly a

relatively easy it actually is but

anyway uh if the Builder instead every

phase of new construction see let's say

if this is phase one then phase two they

say okay we're going to sell homes for

510 and then phase three we're going to

sell homes for uh here we go we're gonna

sell homes for 520. well now all of a

sudden people are happy because they

feel like there's appreciation happening

in the neighborhood and that they made

the right decision so that way these

people are happy these people are happy

and these people are happy because those

people have historically been happy so

that implies that they should be happy

going forward as well right now when the

market goes down the first thing that

Builders do is they increase what are

known as incentives so if the market

value of this property actually declines

to 490 000 because interest rates go up

substantially well then rather than

actually providing a thirty thousand

dollar price reduction why don't we just

give you some incentives and basically

convince you to buy the property so that

way you can Finance this and we'll just

give you thirty thousand dollars in

Builder credits we'll put in whatever

floor you want you want this seven

dollar square foot hardwood floor

because you're an idiot and you don't

understand anything about investing you

just want to blow your money no problem

we'll put that in for you there you go

you got 3 000 square feet we'll throw

this in here for seven bucks a foot

throw in baseboards boom your thirty

thousand dollars is gone I know that

it's a little crazy but but it is kind

of how it goes with the new construction

Builders but now all of a sudden

somebody's paying 520 for a building

they feel like they're only paying 490

but the sales comp actually shows up at

5 20. so all these people guess what are

still happy and they just think oh okay

yeah you put in expensive flooring wow

how pretty how nice your feet really

know the difference no it's a complete

rip-off and it's stupid also things by

the way that I teach in my Renovations

courses there's a coupon code by the way

for those expiring on September 30th you

get private live streams with me as well

where I also do deal analysis and

fundamental analysis on real estate and

stocks okay let's go back to Lennar over

here and see what else they've got for

us and then we're gonna get into those

specific markets one of the big red

flags that I'm seeing from Lennar is

that on September 22nd which just not

that long ago they're telling us that

now the sudden they're being extremely

selective on new acquisitions for new

communities this is really bad for the

national housing shortage but it's a way

of them basically saying hey like our

stock is getting cheap to the point

where we may as well

start evaluating do we actually want to

buy land or do we just want to buy back

our stock now they're not buying back

their stock because instead they're

paying off debt I believe they mentioned

that on one of the first Pages here that

oh yeah here it is after paying down 575

million of maturing debt without

replacement we're fortifying our balance

sheet and we're choosing not to

repurchase stock so in other words they

see the writing on the wall right like

this is a huge warning sign Lennar is

like yeah we're not going to buy back

stock because we're going to pay down

debt because we're worried that things

are about to hit the fan and we want to

make sure we're insulated that's a smart

thing to do as a company but over here

they tell us yeah we're not really

buying land right now because we'd

rather buy stock but they're not buying

stock because they'd rather pay down

debt because they're panicking so

they're definitely not buying land for

new developments right like that is a

leading Red Flag by the way if you're an

accredited investor or not because we're

expecting in January to be able to

accept non-accredited investors there's

something I think that's really cool for

you to know about house hack that we can

do and that's my startup you can go to

househack.com for them but there are

actually three ways that you can get

wedge deals number one this is what

everybody has access to if a flipper is

flipping homes in your area you can buy

a wedge deal so you buy a wedge deal

below market right that is a definition

of a wedge deal for single family

generally that is a fixer-upper for

multi-family that's something that's

below rent uh and then that way the cap

rates uh appear misaligned and and you

can increase the rents to kind of fix

that and increase the value of the

property anyway that's your traditional

way to get a wedge deal those are just

two ways they're actually four in total

but those are the most common two for

multi-family and single family number

two the second way that my startup can

actually get wedge deals is actually

what Lenard said when we go public which

I expect to go public this decade I'm

really excited about that I mean no

guarantees right but I want to IPO this

company I want to ring the stock market

exchange Bell and I want to be able to

reward all of the people who are joining

house hack by not taking a dime of

compensation until they've at least

doubled their money uh but not only that

I'll be subject to massive lockups on

any kind of comp I get and I'm not

getting paid until we IPO which is great

but anyway the next thing that we can do

is you can actually get a wedge deal by

buying back your stock and what's really

remarkable about that is if you think

about it if you buy a 500 000 house as a

wedge deal in a 700 000 neighborhood and

you put 50k into it you get 150k wedge

deal but now if you have a stock market

crash and the value of your entire

company that's holding these assets

Falls below levels where like you're

getting it for a discount of Book value

say another 15 off of Book value well

now all of a sudden you may as well just

buy stock back and you're literally

buying that 550k house in a 700 a

thousand dollar neighborhood now for

another say 10 10 percent off so now

five hundred thousand not even

considering the fix up or four hundred

fifty thousand dollars depending on what

the stock market discount is being

offered and so like when Lennar says Hey

like we might have the opportunity to

buy back our stock it's actually a

really smart thing to do like there are

opportunities where you can actually get

a wedge deal after a wedge deal after a

wedge deal and then another thing that

you can do is you can as a corporation

as a C corporation you can kind of what

I call roof stock your properties which

is where you could take like let's say

if you had a thousand properties you

take like a slice over here a sliver of

maybe uh 10 or 20 of your properties you

sell these off to a pension fund for a

premium right so and and that's fair

because you've already gotten these

properties stabilized or whatever right

uh and you maintain the management some

appreciation to the upside whatever

maybe it's not necessarily a premium day

one but it's a premium in the end when

you when you take a share of the

appreciation those are three ways you

can actually get wedge deals in real

estate now everybody as a normal normal

person watching everybody has access to

option number one only corporations have

options uh of the option for number two

and then corporations or Partnerships

have the option for number three

generally okay so uh you know this is

just all more just education for you I

think it's very important to know so

what are those uh actual markets that we

want to talk about well here we go so

here are the uh Faye or category one

markets so category one markets have

continued to be strong and we've had to

offer mortgage buy down programs and

normalize incentives to maintain sales

momentum so basically like even in their

strong markets they're having to give

people money to get them to buy the

deals and to maintain any kind of

semblance of sales momentum so even even

though these markets are doing well and

they're benefiting from low unemployment

and low inventory they're still having

to cut prices and give more incentives

in these markets so these are not immune

markets these are just sort of like the

best of the worst and the best of the

worst are Southwest Florida Southeast

Florida palm Atlantic New Jersey

Maryland Virginia Charlotte and

Indianapolis and this is a shocker San

Diego oh wow all right Category 2

markets these reflect more significant

adjustments more significant adjustments

these include the following

Tampa Orlando Jacksonville Coastal

Carolina's Atlanta Chicago

Nashville Raleigh Dallas Houston San

Antonio Phoenix Tucson Arizona Las Vegas

Colorado Coastal California that's the

Mediterranean climate for you uh in the

south at least uh Coastal Carolina's

Inland Empire Bay Area Central Valley

Sacramento Seattle Portland each of

these markets have seen traffic slow

we've seen a pile up of cancellation and

while inventory is limited this is like

the most common argument that people

make as well

inventory yeah yeah all right we got it

it doesn't mean that you're immune from

prices going down in fact we've had to

offer more aggressive financing programs

reduce prices and or increase incentives

that's kind of like your flooring thing

right now the third category of markets

these are the ones with a more

significant Market softening and car

Direction already include the following

Philly Minnesota

Pensacola Austin Texas it's a big one

Reno Boise Idaho and Utah while the

drivers and individual dynamics of these

markets are somewhat varied traffic has

slowed significantly fires are taking

more time to make a purchase decision

and many need to be convinced that now

is the time to buy dude now is not the

time to buy let me just tell you that

okay that's ridiculous

there is fear that sales prices have not

hit bottom

and or should I say which has led to

elevated cancellations in these markets

we are focused on establishing pricing

that generates new sales to offset

cancellations this has required us to

work in many cases with backlog to

prevent cancellations in other words it

basically means going up to your your

existing buyers and you're like please

hey can we just give you like a

preventive like ten thousand dollars off

and Here sign this paper saying you're

definitely buying the house right like

in other words there is panic going on

here with significant base price

reductions aggressive mortgage buy Downs

this is important because really what

Lennar is telling you is hey like when

fear strikes that's when these these

areas become category three markets

because notice in category one and

category two they really didn't say

anything other than like yeah we have to

give some more incentives and people are

still buying as soon as they mentioned

the f word which is

fear the fear that sales prices have not

hit bottom that's when the real price

declines come folks and that is normal

that is also normal in terms of what you

would expect in a bubble first you have

the fear of missing out which is people

today still saying things like oh I may

as well get in now before interest rates

go up dumb really really dumb whatever

that's exactly what happens right before

a bubble pops and then what do you end

up having you actually fear that oh no

prices are falling and I don't know when

they're going to bottom that usually

lasts for a few years that sort of fear

that fear becomes so entrenched that

when it's time to buy most people don't

buy but fortunately I played this Rodeo

before of timing the bottom in the real

estate market and that is why now we're

going to do so at scale go to

househack.com to learn more about

househack now there's also this talk

about this professionalization of single

family dwellings still though only about

20 percent of home buyers are investors

but but what they mention here is those

competitors are actually slowing down

and their interest in single families

has moderated again another opportunity

for house hack I mean this is like I

could not have asked for a better time

to launch this startup this is so

phenomenal and and we're killing it with

fundraising right now we're over well I

think we're over 17 or 18 million now

this is really really good and we're

only in this like two weeks so far which

is insane that at the bottom of the

stock market we're still getting massive

uh sign ups uh from from investors we we

if we get to a number that's too too

high we'll end up having to close the

round because we're selling founder

shares so anyway uh they do mention that

here our incentives are about four and a

half percent uh right now so that's sort

of the total uh mix of how much they're

incentivizing sales that is an average

across the country and they are seeing

inventory building up so you do have

really red flags here going forward I

think honestly not only are the

individual markets red flags but you

also have this mad massive red flag that

when they tell you yeah instead of um

buying land to build new homes we're

just gonna buy back stock and then in

another part of the same investor report

they're like yeah you know we thought

about buying back stock but we're

actually just going to pay down our debt

I mean it just tells you what's coming

and if you don't believe the second

largest homebuilder in the country that

real estate is hitting the wall

nobody can help you except for maybe me

and you taking advantage of that amazing

coupon code that expires at the end of

the month September 30th linked down

below make sure you get into those

programs and building your wealth and

you can directly ask me questions in our

q a live streams thank you so much

goodbye