The Next Housing CRISIS Is Here: How the Media LIES to You.

hey everyone me kevin here this

particular video from the hill

went essentially viral it has 1.285

million views and it was just posted

five a days ago

it is crystal ball the next housing

crisis is here and the

villains are exactly who you'd expect

folks in this video i'm going to respond

to some of the things that are sad

with data and insights and just breaking

apart some of the things that are said

so we can have a better understanding of

what is

really being said here it's a very good

video

it's very emotional but it misses a bit

on the facts

so let's get into it here we go all

right crystal what's on your radar

well friends i've got a question for you

this morning what do you think

about this house it's a modest ranch

built in 1948 in the maryland suburbs of

dc

four bedrooms two baths about eighteen

hundred square feet needless to say

seen better days nothing's been updated

kitchen and bathroom still the original

from the

40s the realtor's description says in

part

this isn't a state home in need of some

serious love being sold strictly

as is please do not go out on the deck

it is not safe

so this dilapidated modest house was

listed for what to me

already seemed like a hefty sum of 275

000 but improbably it sparked

an absolute feeding frenzy

88 offers later 76 of which

were all in cash the house sold for

nearly

half a million dollars it went for 460k

that's 70 percent higher than the

original

list price all right pause so first

we just had a news publication begin

with oh my gosh a house was listed for

250 000 and it's this horrible

disgusting fixer-upper

how does it get 88 offers well let's

disconnect ourselves

from housing for a moment and just think

about ebay what happens if you put

something

valuable on ebay like let's say you take

the latest iphone and you put it on ebay

you go you know what i'm going to

android i'm sick of freaking apple and

tired of it i want to throw it out the

window but before throwing it out of the

window i'm going to

put it on ebay so you put it on ebay for

a dollar

what's going to happen you're going to

get hundreds and hundreds of bids

now how does that relate to this

particular house

well it's simple the market works the

way the market works

and i'm not saying that it's good that

housing prices are going up and we're

going to talk more about unaffordability

in a moment

but take a look folks this is that house

118 fleetwood terrace in silver spring

maryland

uh and you could go through the same

exact pictures that they went through

here

literally the same house and so you'll

notice the house sold for 460 thousand

dollars

well it's a four bedroom two bath 1847

square foot home

probably if i was going to fix this up

as a rental property investment

i would probably be able to get this

done we do have a basement we do have

some mildew issues we do potentially

have some legal add-ons

deck issues we've got quite a few things

here uh with this square footage i'm

probably into this thing

at least 70 to 80 thousand dollars some

of you watching might be thinking come

on kevin that's a 200 000

remodel well not if you do it quality

but rental grade right we're not talking

about

a 70 000 kitchen we're talking about a

20 15 20 000 kitchen anyway okay

investor side aside now let's look at

the neighborhood this is in

so let's zoom out a little bit and uh

let's see here

three bedroom two bath so that sold for

450 here's a three and two

uh in a similar neighborhood backing up

to a busy road

dale drive right here because fleetwood

terrace is right here and this three and

two which is 250 square feet smaller

sold for six hundred eight thousand

dollars

see here's that 460. here's a four

bedroom three bath that's 300 square

feet smaller off a busy road that sold

for almost seven hundred thousand

dollars

here's a four bedroom three bath that's

a similar square footage

that sold for eight hundred thousand

dollars in january

and it's move-in ready so all of a

sudden

is it a surprise that this house sold

for four hundred sixty thousand dollars

when a similar house fixed up sold for

800.

even if you put 200 000 into it you'd

still be

up over a hundred fifty thousand dollars

so the context is very helpful let's

keep going

all to be the proud owner of a suburban

property that is currently dangerous

and unlivable the winning bidder was not

actually the highest offer but they were

totally in cash and they had all the

paperwork

ready to go so this type of home in a

suburban area it should reasonably be

a kind of a starter home maybe for a

young couple with the energy to fix it

up

but what young couple has half a million

dollars in cash

just laying around wait a minute wait a

minute

she's suggesting that this isn't fair

because a young couple should be able to

start out in this

four bedroom three and a half bath 1850

square foot

home with a lot in an 800 000

neighborhood no that's not how it works

when people

start out oftentimes we start in condos

we start in one bedroom one bath we

start in two and ones

we start in three and ones or three

bedroom two baths that are small homes

and then we grow into

larger and more expensive homes so this

is a little bit

beginning to be a slippery slope

argument now don't get me wrong

do i think it's it's fair that sellers

always go for cash offers no but they

also don't often

oftentimes there are sellers who are

like i don't want a flipper to own this

as a real estate broker i've seen this

many times sellers say i don't want to

sell it to a flipper

i want to sell it to a homeowner and

they're more than willing to take

uh you know lower down payment offers as

long as people are price competitive

heck sometimes you'll find home buyers

who pay even a little bit more than the

flippers do

sure sometimes people want quick cash

easy especially when the house is vacant

but this is a bit of an out of

contextualized argument that she's

making here that well it's not fair that

a young couple can't start in this eight

hundred thousand dollar neighborhood

let's keep going it's now this

particular home might be a bit of an

outlier but there is no denying the fact

that the housing

no it's not an outlier when something is

well underpriced like that it gets many

offers

it has been blazing hot especially for

the upper middle class

now the media has covered part of that

story affluent professionals during

coronavirus

they started prioritizing some different

things they wanted a home office space

more outdoor area

i just want to make the note that i

think it's interesting how she's trying

to

and this is something they do on the

show she's trying to set herself up as

being

different from the media this is the

hill they are the media

they sit on capitol hill as the media

but in this conversation they're trying

to separate themselves

to say hey you know the media is just

covering how rich people are moving to

the suburbs but we got to be covering

this as well

but this also is not exactly accurate

coverage what's happening here

it's missing a lot of detail to create

emotion

but it's doing so in a way that's

misleading to people

as with remote work of course proximity

to the office became less critical

at the same time these affluent workers

they fared really well during the

pandemic

they cut back on expenses and availed

themselves of pandemic era programs

but they were able to stay in their

lucrative jobs unlike the working class

that was of course screwed over in

basically every imaginable way

yes it is true working class people

retail hospitality restaurants got

screwed

the best they got was maybe unemployment

and some stimulus checks

people with a lot of real estate got a

huge forbearance

worth tens to hundreds of thousands of

dollars even if they didn't even

need it yeah the system is broken she

is right about that the disproportionate

amount of money that went to

hedge funds via ppp loans versus

individual

people who actually need it she's right

but now we are learning that the housing

boom and possible bubble

is being driven not only or maybe not

even primarily

by the pmc wanting more gardening space

permanent capital

is buying up homes at astonishing rates

take a look at this new report from the

wall street journal

if you sell a house these days the buyer

might be a pension fund

wall street journal weirdly focused

their headline on pension funds because

i guess they're associated with workers

but the truth is it's all sorts of rich

people in their financial institutions

that are buying

up american communities the report

quotes a real estate consultant who

estimates that

one in five houses in the u.s is sold to

someone who never moves in

that same analyst told the wall street

journal you now have

permanent capital competing with a young

couple trying to buy a house

that's going to make u.s housing

permanently more expensive

wait a minute wait a minute wait a

minute that was a little bit of a

slippery slope here again

drawing these correlations in in my

opinion a biased way first of all

she's slamming pension funds for being

for the worker

but buying up their homes but wait a

minute just because

the title said pension funds are buying

up homes

doesn't mean that pension funds are

buying up all of the homes

not even close to all of the homes in

fact she doesn't tell us

how many homes pension funds are buying

instead she cites a consultant

who says as many as one in five homes

are bought by people who don't live in

them so 20

of homes were bought by people who don't

live in them so she merged this

data here to imply that pension funds

were buying up all the homes

but missed a really big piece when it

comes to

real estate look at this article a

single family investment

goes institutional let's drop down to

this section

right here a freddie mac report

published at the end of 2018. i

understand this is end of 2018 this

article was published in 2020

showed that only one percent of

single-family rental homes or

approximately 188 000 properties were

owned by institutional investors

on the other hand roughly 80 percent

were owned by

small investors with portfolios of 10

houses

or less so this is

opening up a whole new door here this is

suggesting wait a minute

yeah maybe there are institutional

investors buying single-family homes

but individual investors

who don't live there could also be the

big competition

in fact here's an article from a

harvard's joint center for housing

studies

which indicates 74 of individual home

buyers

were individual investors then

followed by a limited partnerships so

of the investors in the rental housing

space

74 are people like you and me and

25 might be institutional so wait a

second

she said with her data that one in five

homes

gets sold to people who don't live there

so that means out of 100 homes

20 go to investors of those investors

some might go to pension funds some

might go to

llcs and other corporations or whatever

but

statistically 70 to

75 percent of them go to individual

investors

so this means out of a hundred well out

of 20 i should say

if let's say 70 or 14

go to individual investors yeah that

means out of a hundred

maybe six go to pension funds llcs and

institutional investors

the way the video conveys this message

is

pension funds are buying everything you

can't compete you're screwed

the american dream is no longer

attainable it's a little bit misleading

and even the 2020-21 data reiterates

this

in fact if you go to the actual article

that she

cited and we get this talk about pension

funds

buying up homes when you type in the

word pension fund you actually only get

one match within the article and the

article just says from individuals with

smartphones and a few thousand dollars

to pensions and private equity firms

with billions yield chasing investors

are snapping up

single-family homes yield chasing

investors well that includes

those individual investors as well in

fact if we go over here a consulting

firm found

houston uh to be a favorite haunt of

investors have lately accounted for 24

of home purchases there

so you still have home buyers buying 76

percent of homes

investors buying 24 in houston

but of those investors um vast majority

are

individual investors unfortunately so

far even though she's trying to convey

that she's

different from the media she's kind of

pulling some media tricks here

private equity giants hedge funds and

other economic royalists are buying up

houses in some cases entire

neighborhoods

and then they're either getting directly

into the landlord business or they're

flipping them to entities that will rent

the suburban american dream to you

as a result home prices have jumped 16

percent nationwide in a

single year okay also uh wrong

correlation

home prices have not jumped 16 because

of institutional investors buying homes

institutional investors are a small part

sure they might be buying more homes

than they have in the past but they're a

small percentage none

the there is no statistic to argue

otherwise

yes the number is growing but it's a

small portion most

home buyers are individuals why are

prices going up

because interest rates go down there's a

rule of 10x

interest rates go down one and a half

percent home prices go up

15 interest rates have gone down one and

a half percent yeah recently they've

ticked up a little bit again

and i'm not saying it's good that home

prices are skyrocketing the way they are

but pension funds buying up homes is not

the only thing contributing to prices

going up that is pension funds are not

to blame for home prices going up

sure they might be taking away a little

bit of inventory

relative to the lack of inventory we

already have and so they're adding to

the problem

yes they're not they're certainly not

helping the problem it's not like

pension funds are like here's some stuff

for you to buy right

totally agree with that but pension

funds are not to blame solely for this

price increase it's interest rates let's

be real

and obviously the inventory shortage

which again pension funds are just

contributing to in a small way

in the northeast and the west the

increase has been even wilder with

prices jumping

21 year-over-year does that sound to you

like the type of healthy growth that's

going to lead to vibrant and sustainable

communities

of course not it's another disaster in

the making

best case scenario is that the prices

just continue to go up indefinitely

which is great if you already own a home

and great if you're a wealthy investor

but a disaster if you are anyone trying

to buy a home for the first time

and not being able to buy a home is a

disaster

because it's basically the only

remaining path to building any sort of

stable wealth in an era of privatization

401ks and cobra

instead you'll be doomed to have some

private equity goon as your landlord

applying their harvard education and

come up with new ways to squeeze

every penny they possibly can out of you

they get to build and build and build

their wealth and you

never do testimonials from the families

already living this nightmare are

predictably horrible

distant corporate landlords who do

nothing as porches collapse pipes burst

and mildew grows

tenants with no recourse and no options

who are stuck in

hazardous homes the slum lord of yore

replaced with some of america's

wealthiest institutions

but with the end result exactly the same

so that

okay let me pause there for a second

first of all look

renting can be very problematic and the

reason renting can be so problematic is

because

so many regular people who don't

understand property management and laws

and legality

get into property management this is a

big problem i don't actually believe

that this is an

institutional investor problem it's

oftentimes

clueless landlords who yeah they put

lipstick on a pig

they don't fix problems it's a big issue

they don't understand laws they don't

understand wear and tear they don't

understand you know a security deposit

rules

and yeah there are many many individual

investors who screw this stuff up

but it's not pension funds or or massive

funds like blackrock they're not the

only landlords in fact they're not the

majority single-family landlord

in fact they probably have more systems

and more attorneys to know what the heck

to do that's correct than an individual

landlord many individual landlords and

they're a great individual landlords out

there

but many individual landlords get into

rental property because yeah they see it

as a way to build wealth and she's

correct in what she's saying

real estate is a phenomenal way to build

your wealth i encourage everybody

to get their own home and then turn it

into a rental but when you start

your first rental property journey

unless you have guidance or a property

manager

it's it's overwhelming it's scary and

yeah people are pinching pennies and

oftentimes the wrong ways like plumbing

issues that should not be there

electrical issues that should not be

there preventative maintenance that i do

but maybe an unsophisticated landlord

doesn't understand to do

it's a big big problem absolutely

let's keep going the best case scenario

the worst case scenario it's another

dangerous

speculative bubble sure market's hot

right now so everyone's buying buying

buying with all cash offers gobbling up

whatever they possibly can

but at some point the music stops the

gains reverse even if only by a little

bit

and all the big players who bought in

big rush for the exits to try to avoid

being the ones left holding the bag

they dumped their inventory back in the

market dropping prices

ordinary homeowners who took out giant

mortgages

to desperately grasp for that american

dream watch their home prices plummet

leaving them upside down and totally

screwed i'll give you one guess

as to whether it will be the big guys or

the homeowners who will get bailed out

as one sociologist at the london school

of economics put it

the story of housing in 21st century

america okay

hold on a second look we know that there

are bad landlords but there are also

really good landlords and i would say

there are more good landlords than there

are bad landlords and remember

most landlords of single-family homes

are individual people like you

and me people who owned a home moved out

of it and turned it into a rental

or bought a rental they saved up and

bought a rental because they want to be

a part of the american dream

and build wealth look are you going to

build wealth being a renter it's going

to be a lot harder

totally agree with you it means you have

to start smaller you have to start with

a lower down payment you have to

suffer that higher monthly payment

whether that means you have to work more

whatever you have to do to get in

unfortunately that is a problem i

completely agree that's a problem but

wait a minute what she just described is

a

false dilemma which is a logical fallacy

she says best case scenario

home prices just keep skyrocketing and

things keep going up

and worst case scenario the housing

market speculative bubble

crashes and everything implodes and we

have a disaster of home prices crashing

and the big rich institutions are going

to get bailed out

okay let's un package that a little bit

and we'll go backwards

first of all is it true that

institutions get bailed out

when things hit the fan yes and things

potentially hit the fan in march of 2020

but guess who got bailed out

everybody who owned real estate every

homeowner

had the opportunity to get mortgage for

bands institutional folks

had the opportunity to get mortgage

forbearance you know who got screwed

it was tenants totally agree tenants got

screwed

they got oh well we won't evict you okay

great but the other people get to save a

ton of money on the bills like the

tenants still owe the money

exactly now technically the people

taking forbearance still owe money but

if you can hook that under the back of a

20 or 30 year loan

it's basically like free money

opportunity cost makes that

free money so worst case scenario is the

housing market crashes

best case scenario is it keeps going to

the moon

this is again a false dilemma it's a

false

choice that there are only two things

that could happen here and first of all

it's wrong because best case scenario in

my opinion

is we get substantially more supply in

the market

and we get a moderation in home prices

here let's use the red color we get a

moderation in home prices

and we get back to a normal growth

in housing rather than this insane

parabolic move

which we've already started this

parabolic move we want to get onto a

sustained

housing path so yeah it'll look like an

s curve

and that's again because of low

inventory and low rates and sure

when rates go up we might even see

housing prices dip down and come back up

but this in my opinion here is probably

more like a

60 likelihood than this likelihood that

this unsustainable madness of continuous

buying and buying buying continues

that's not possible in my opinion

there's a small chance it keeps

continuing for a few years but it's not

going to go on forever

and this worst case scenario is really

another scenario

that makes again for a good clickbait

and a good video

but it's in my opinion not extremely

likely

why because think about it this way of

the people who are buying homes today

guess what the average fico score is of

people buying homes

it's 800 that means extremely high

qualified borrowers are the ones getting

homes right now

is that fair to people trying to start

no totally agree

there are problems there and those

problems should be fixed and addressed

but these are not people with high

quality these are not people with low

quality loans i should say

these are not people with no income no

job no asset loans

this is different and i'm not trying to

sound like oh this time is different

and say that there's not going to be a

crash there very well could be if we see

interest rate skyrocket there very well

could be

uh and that's important to know but do

the people have to sell

well they probably have sustainable jobs

they probably have high credit scores

and so there's a lower likelihood of

them defaulting

especially since they have 30-year

fixed-rate debt compared to people

taking two-year two-year adjustable-rate

mortgages or

six-month teaser rates with at zero

percent and then adjusting up to seven

percent like the kind of crap that we

saw

back in the 2006-2007 start of the

global or great financial crisis so

again

this a false dichotomy this logical

fallacy and reporting here

is very misleading there's way more

nuance to answer these questions some of

the things she's saying she's making

good points

but the conclusions she's drawing are

incorrect

we saw it first with the housing we saw

it with who's actually buying homes and

we're seeing it now with the market

crash argument all right so then for the

rest of the video they go into this

conversation about how unfair it is how

difficult it is to build

intergenerational wealth

and i get it i help people learn exactly

how to buy real estate in fact

totally for free totally free for free

you do not have to buy

because i do i have courses not only on

investing in stocks but

real estate property management real

estate investing getting started with

xero

stocks sales you name it but google this

okay if you found this helpful

start with ten thousand five hundred

dollars real estate investing

all right so the first one that you

should watch is

right here how i turned ten thousand

five hundred dollars into two hundred

ten thousand dollars in 90 days beginner

real estate

another one that you can watch is uh

the blunt video so meet kevin real

estate start blunt

right here real estate investing ten

thousand dollars to a hundred thousand

dollars fast and blunt

you could even watch this older video if

you want right here watch these videos

and hopefully they help you actually get

into

real estate because yes grinding away as

a tenant

makes it a lot harder for you to build

wealth when you could be building wealth

by investing in real estate now i'm not

trying to show real estate here i get no

benefit as to you

buying or selling real estate it makes

no difference to me i don't care i have

30-year fixed rate loans on my real

estate

uh we manage our own properties we're a

small family

you know we're rental property managers

and we started

the way i described in this video the

single-family house that we moved out of

and turned into a rental

so anybody can do it i strongly believe

that

but you've gotta ignore or at least be

able to look

past don't ignore but look past this

kind of drama video and understand the

facts

and then understand okay how do i

actually get started

how do i get in on this because

the argument that renters don't get

ahead when owner homeowners do

is correct the average wealth of a

homeowner

is 176 000 the average wealth of a

tenant

is five thousand six hundred dollars let

that sink in

thanks so much for watching i'm not

gonna watch the rest of that video if

you wanna watch it go to the hill watch

it yourself

uh folks thank you so much for watching

this reaction and we'll see you in the

next one

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you