The Housing Collapse is Starting.

Worst housing market in America is now

Cape Coral, Florida. Home prices have

been battered by everything from

overbuilding to insurance costs. Mind

you, that's all and realtors warn

there's further to fall. Mind you,

that's always the irony is that in red

states where it's so easy to build, you

end up overbuilding and home prices

fall, which actually makes housing more

affordable, which is great for new

buyers but bad for investors, right?

Cape Coral, Florida. They came in droves

via Zoom, probably during the pandemic.

Thousands found an inexpensive slice of

paradise in Cape Coral, Florida. A city

with more canals than anywhere else in

the world. Wow, that's cool. Uh house

hunters were so taken with this boating

community of Florida's west coast that

many purchased homes sight unseen during

the early years of the pandemic. Median

home price soared 75% to $419,000

in 3 years, transforming the community.

Now 3 years later, for sale signs align

every other block. Open houses are

deserted for hours. Foreclosures are

ticking up and home builders are listing

halfbuilt shells at discounts as they

abandon their projects to cut losses.

Locals say the lack of traffic has led

to an increase in vehicles speeding

through empty residential streets. Uh

well, let's take a look at the Redfin

data center on this just to get a peak

here. New listing prices. Oh yeah, look

at that. 2025 is the blue line right

here. New listing prices are 5% on list

price under their 24 levels and uh

substantially under their 2022 levels.

Uh probably to the tune of about 15ish%

or so. Let's see what we got. A median

sales prices. So these aren't listing

prices. These are what things are

actually closing for. Things are closing

for about $369,000.

That's compared to at peak in 22 you

were sitting at about 421. So 369

divided by 421. Yeah, you're about 12.4%

lower peak to I suppose this peak over

here. A little lower if you go down to

here. Uh, and if we look at month's

supply, you can see month supply is

exceeding all of the prior three years

here as basically homes sit on the

market longer. The number of active

listings is higher than any year prior

and as a result prices are falling. Uh,

not a terrible surprise when you

overbuild and you have a temporary

inflow of of uh people moving to the

area. One thing I think people forgot

about COVID markets, it's not just that

you can overbuild in a COVID market, but

it's also that that flow of people as

part of the exodus out of California

stops when the exodus catalyst stops.

People were leaving California in droves

to places like Texas and Florida because

they were tired of the draconian

lockdowns imposed by people like Gavin

Newsome,

who's a terrible person in my opinion.

Uh but the point of that is let's keep

the politics aside. When that catalyst

stops and all of a sudden California

becomes less terrible, fewer people

leave to go to Texas and Florida to

migrate out or potentially even people

reverse and go back to California if

they can afford to come back to

California. Uh it's possible they're

also now stuck where they've gone. Now

you have less of this impetus of people

moving into an area that has now also

been overbuilt assuming people are going

to continue to come. And so what ends up

happening? Well, prices go down. This is

always the irony when it comes to people

saying, "Oh, we should build affordable

housing. You don't need affordable

housing. You don't need rent

stabilization. You just need more

building if you want prices to come

down." And usually it's those blue state

policies that actually restrict the

level of a new building that you're

seeing. Uh actually if you look at uh

California what's really interesting is

just in the last 13 hours you actually

saw a a new limit pass to SQA in

California which was one of the one of

the big environmental challenges that

actually limited building in California

because basically anyone could file a

lawsuit to hold up new construction

development for years. And California

finally signed legislation that would uh

essentially speed up development uh of

of homes in California by limiting how

much SQL lawsuits could end up

restricting new housing developments,

which is great. See, I'll read this. For

years, prodevelopment advocates and

build and the building industry argued

that neighborhood groups and

environmentalists wielded SQA to delay

or halt new developments. Very true.

Now, a large portion of urban infill

housing developments, housing built

around existing developments, will no

longer be subject to the law. This means

developers won't have to research or

mitigate the ways new construction could

impact local traffic, pollution, noise

levels, or other environmental factors.

Remember, anybody previously had the

opportunity to file a lawsuit saying,

"Hey, your new development is going to

hurt whatever, whatever, whatever uh one

of these items here." And it really led

California to restrict its ability to

develop at all. again leading California

home prices to continue to go up year

after year after year. This is somewhat

of the irony that I think is lost often

when it comes to real estate analysis.

But, you know, having been involved in

real estate for coming up on 16 years

here, uh, as as an investor, as a

broker, as a lender, you name it, uh,

and and running a real estate startup,

Houseack, which you can invest in, by

the way, as a nonacredited investor. You

earn 5% yield through conversion and all

the upside in the stock. Read the risks

over at houseack.com.

You know, it's this all this is

reasonable. This all makes sense. Here's

a realtor says Cape Carl is the worst

housing market in America right now. And

I used to live in Florida. Spent 16

years growing up in Florida. Home prices

uh have tumbled more than 11% in two

years through May. Uh most of any major

metro area. You've got here half-built

homes. The area's home prices have

declined for 12 out of the last 13

months and 52% of the homes have

experienced price cuts. What's more,

this is more than anywhere else in the

United States. They also have the most

underwater homes in the country with

nearly 8% owning owing more than their

homes are worth. That's scary. Uh, you

know, once you get more underwater

mortgages, that's where all of a sudden

if you get a normalization in the

beverage curve, you could potentially

get an unemployment spike. The

unemployment rate rockets up.

normalization of the uh beverage curve

is basically just an increase in layoffs

in an environment of low job vacancies.

And then all of a sudden when the bill

comes due on these mortgages, oopsy

dupsies.

Uh the home bought three years ago by an

investor looking to rent it on Airbnb is

fully furnished. The home is listed at

$675,000,

but the seller cut the price to

$500,000, about $100,000 below its

purchase price from the prior investor.

This was another thing to pay attention

to as well is is Airbnb was really uh

something that fostered a bubble economy

in in one part because people wanted to

escape being around other people in

hotels

uh which incentivized Airbnb but then

people also wanted to temporarily be in

areas that were again subject to less

draconian restrictions which meant

people wanted Airbnbs in locations like

Texas or Florida. The problem with this

is Airbnbs are usually way overimproved.

So, what happens is you buy a a house

that's say worth $400,000,

and you do your renovation on it as a

fixer upper, which might be an $80,000

renovation, but then you spend another

$80,000 or even $120,000 or $150,000

doing extra things like putting in a

pool, pickle ball courts, um you know,

staging, uh expensive furniture, Disney

designs when you're close to Orlando's

Disney or whatever to make your Airbnb

look thematic, to try to make it stand

out on Airbnb as an experiential Airbnb.

The problem with this, all of those

extra improvements that you put into the

property don't actually create value for

the property because you're

overimproving. In real estate, home

valuations will always collapse to the

mean. So, if you have a house that is a

complete fixer upper, it will sell for

probably less than it's worth. And uh

you know mostly because people don't

want to do the work and the effort that

it takes to to get back to that mean

level is usually overvalued by people.

People think it's going to cost a whole

lot more to bring it back to the mean.

That's where investors know, oh no, I

only have to do basic things like paint

carpet, bathroom, kitchen, and I'm going

to get back to that mean pricing. That's

how you could pick up a good deal in

real estate. That's how you could

explode your net worth by buying a good

fix or upper deal. We call them wedge

deals at House Hack. It's what we do at

scale uh you know in different parts of

the country with house hack. And if you

over improve a property, you always get

pulled back to the mean. It's just some

of the problems with real estate. Most

people don't understand. But that's

okay. That's that's why you subscribe to

the channel here to understand it and

get the insight in terms of how this

works. It's been an onoff off market for

the year. Homes have received zero

offers. We're cutting the price further

tomorrow. Housing markets throughout the

United States are grappling with high

mortgage rates, but Cape Coral is

suffering from nearly every affliction

that you can have, right? The Airbnb

disaster, uh, natural disasters like

hurricane issues. Mind you, Florida is

not necessarily a bad place to buy. You

just need to buy, in my opinion, in

places that are further away from the

coast and in areas that are more

hurricane resilient. I'll give you one

of those for free over here because I

love y'all. But uh you know a county

that I actually grew up in is Broward

County, Florida. I grew up in the 33324

zip code. And here what you find is as

you get maybe 20, 30 minutes away from

the coast, you really remove the flood

risk and you have properties that are

frankly built uh to you know that are

designed to withstand uh the issues of

hurricanes. like none of Oh, I can't I

can't do Google Street View and G gated

communities apparently. But you go into

a master plan community uh you know like

the Weston Hills uh which is an

absolutely gorgeous environment like

love this area. Uh you don't really have

an environment where you're really

concerned about hurricanes and the

hurricane storm damage that you would

get on the coast which is also where you

got that Airbnb demand uh and sort of

this temporary fleeing remote work

lifestyle. At the height of the

migration frenzy, Lee County, we where

Cape Coral is located, had 35 homes

available for sale. Now, there are

12,000 listed for sale. It's 4x. With so

much supply and very little demand and a

seller base where over 50% are cutting

prices, I'd expect this downtrend to

continue. I think it's time for a flight

to Florida.

Uh these are, by the way, mosquito

screens in case you've never seen one

because you do have to deal with bugs in

Florida. Uh, and look, they both look

unhappy.

Uh, this is a very ' 90s beach style,

maybe even 80s, late ' 80s, '90s beach

style remodel there. One of the most

sought after neighborhoods in the

kitchen. They didn't think they'd have

to wait this long or in the neighbor

most soughta neighborhoods in the city.

They didn't think they'd have to wait

this long to sell. 15 price cuts and two

years later, they still haven't found a

suitable offer. You know, something to

remember too is it doesn't really matter

how many price cuts you had or what

price you started at. Like people say

things like, "Oh, you know, it was

listed for $700,000 and we cut the price

to 500 and it's still not selling."

Sometimes there's this nature of like

you you are trying to like you're not

shooting ahead of the running deer. If

the running deer is going like this and

prices are going down and you start at

$900,000 and your house is really worth

700 and then you get to 700 over two

years, but now it's actually worth 500,

you've done nothing, right? Like you've

failed. You've been chasing the deer.

You're supposed to in real estate take

your gun and you shoot ahead of the

deer. You have to price ahead of where

the market is in an appreciating or a

depreciating market. But again, most

people are too stubborn to actually

price properties appropriately and then

they end up sitting. Uh, I just hope

that if we end up selling, it's not so

far down below our asking price that it

puts us into debt. Nobody cares about

your asking price or how much debt you

have. Absolutely nobody cares.

Area's apartments are also struggling.

New developments are offering deep

concessions. Well, yeah. Again, like

this is the danger with new

construction. New construction also

typically sells for a little bit above

market prices. Uh, and the way that new

construction kind of manipulates home

buyers is they they feed you a bunch of

upgrades to make you think you're

getting a good deal, but you're really

paying higher than what the market would

bear if you went to resell that

property. The resale market does not

care about your upgrades as much as a

new construction home buyer cares about

upgrades because a new construction home

buyer is going to put a dollar for-doll

value on that, you know, $20,000

flooring upgrade that they're buying.

The resale market might only put a

$4,000 value on that $20,000 floor. Uh

that's because again now now it's a used

product. It's like a used car.

Everything merges back to the median.

And until you take an economic point of

view and understand how real estate

pricing works, you're always going to

make mistakes in real estate investing.

Fortunately, uh, with my real estate

startup, Houseack.com. I'm not trying to

shill it. Actually, I am. Uh, you know,

I think we're in a really great place

because what we have is about 73ish

million dollars of cash in real estate

and no bank debt. Uh, and you know, you

can invest in our convertible round,

which the earliest it would convert is

27, but basically you only convert if

our stock price goes up. And with I mean

right now we've really only been raising

money as a real estate only company uh

where we buy homes that just we buy

really good deals below market value and

hodddle them. You know, you could see

our properties and sort of just the

renovations that we do over here and you

can kind of scroll around on the main

page of them. Should probably update

what the properties are worth because

they're probably even worth more right

now because we bought in areas that are

underbuilt. Uh but anyway, you know,

this is before some of the exciting

things that we're doing and working up

that uh that I think cost very little

money, but are investments into a a huge

future. So, I'm very very excited about

what we could potentially pull off with

house eye. Knock on wood, no guarantees.

Uh that said, going back to this Wall

Street Journal piece here, uh let's see

here. Hurricanes have also punished the

West Coast. Many homes flooded. Well, mo

those are co close to the coast again at

although you don't get too many people

that go too deep inland from the west

coast. You get that more from the east

coast. At the same time, new state

regulations meant to fortify condo

developments after the condo collapse

that killed 98 people in Miami are

pummeling the market. Condo owners are

dumping their apartments on the market

because they can't afford what amounts

to six figure special assessments.

Right? A special assessment is basically

when your HOA says, "Hey, we need to

like shore up the foundation or put a

new roof in or whatever." and they just

take the cost and divide it by the

number of owners that there are. People

think that HOAs are a ripoff, but

something you have to remember about an

HOA is that they're nonprofits and

they're usually money losers. You know,

it's just basically a coordination of

your neighbors deciding on upgrades for

the entire building. Uh, so you know,

when you look at it as a nonprofit,

they're really just paying for your

slice of the expenses that your building

would really require anyway in common

areas or otherwise or utilities or what.

So, let's see here. Somebody's uh

struggling to find clients in their

makeup studio. The cost of living here

doesn't match the wages. Everyone is

begging for work. Well, that doesn't

sound good.

Home builders who can no longer make

their numbers work have pulled out of

some construction projects offering them

for sale asis.

Uh yeah, I've seen this as well in in

23.

We went to Phoenix and we saw some

flippers that were losing their pants

that are like, "Please just buy the

property as is." And I'm looking at it,

I'm like, "It's permitted. It's a shell.

I just have to go put drywall, kitchen,

and baths in and it's done." But I

thought even then the the numbers didn't

make sense because you know pricing was

getting hit over there. So it wasn't uh

wasn't the most ideal uh you know to

pick up on. And that's something you

have to be aware of with picking up

these construction projects too is if

you pick up a construction project you

know there's a delay between when your

completion hits and uh you know pricing

can be substantially different then. And

a lot of people who develop want to

resell. This is kind of like how in New

York you could hit that rent

stabilization. you develop and then you

want to resell, but your your buyer ends

up getting stuck holding the bag on the

stabilization rents.

Uh, okay. Let's see here. Home sits on a

freshwater canal. The drywall is up, but

the roof is incomplete without doors and

windows. The home is exposed to the

elements. A faint line of water damage

and spotted mold is visible on the

ceilings where small spiders have

settled in. Investors are also running

for the exits. Some rented out their

homes, but are now competing with

cheaper multif family developments. and

Airbnbs drew less interest as soon as

Americans began traveling abroad. Again,

something to keep in mind, too, is

hotels have gotten a lot better. Like,

Airbnb really woke up the hotel

community for, hey, like we're going to

provide you better service and a cleaner

stay and a more consistent stay. I

personally have stayed in Airbnbs in

Florida and I'm like, my gosh, the the

quality controls are horrible uh in in

many of the Airbnbs and it it makes it

for a very like scummy rental

environment. Like I I will rather rent

two hotel rooms next to each other,

connecting hotel rooms than an Airbnb

because I can get consistent quality

often, frankly, at a cheaper price

because there's just so much

competition.

Uh, someone just recently sold a rental

home at a $200,000 uh loss when the

fundamentals stopped adding up. It was

either keep losing $49,000

a year or take the tax break on loss.

Uh, honestly, $49,000 a year, she's

probably including principal payown in

that. That sounds a little high. That's

a $4,000 loss per month. That's either

like just a like you really screwed up

your investment projections on Airbnb

potentially or you're including

principal payown in this which really

isn't losing money. Uh you know you're

moving it into another investment

basically. Now if that investment keeps

depreciating fine but again like you do

have to consider when people quote their

monthly payment losses

you uh uh you end up with um some of

that being principal. Look at this.

Foreclosure boat tours. Free foreclosure

boat tours. What is this? A realtor

giving boat tour? That is hilarious. Oh,

that was in 2009. Okay. Yeah, I didn't

think we were starting to see that yet,

but

that's actually funny. Uh, couldn't get

rid of the properties in 2009. At this

time, many co keep coral homes were

bought with cash. New regulations

require strict underwriting. More money

down. Still economic uncertainty. Blah

blah blah. Uh, yeah. There. Yeah. Oh,

yeah. And then you don't have the

property tax limitations that California

does. See what like people always

on California because they're like, "Oh

my gosh, but California sucks for

landlords." It's actually great for

landlords. They keep your property taxes

low. They limit new construction. Like

if you own real estate in California,

you're doing great. You want to go buy

real estate in California. It's hard.

You know, it's it's it's challenging to

get in. But again, those are some of the

ironies just of uh of how real estate

dynamics work. And in order to

understand real estate, you really have

to be a professional in a market or have

just a lot of experience or get a

realtor that that knows what they're

doing to actually help advise you. Uh

now, the tough thing with that is, you

know, how many realtors have a lot of

experience? Well, that you have to kind

of sort out yourself because there are a

lot of people who don't. Uh so, you got

to find the right person. Makes it

challenging. tough housing market for uh

some of those overbuild markets. Austin,

Texas has been getting hit hard and now

uh parts of South Florida. Pretty wild.

House hack owns no properties in either

of those. Why not advertise these things

that you told us here? I feel like

nobody else knows about this. We'll

we'll try a little advertising and see

how it goes. Congratulations, man. You

have done so much. People love you.

People look up to you. Kevin Pra there,

financial analyst and YouTuber. Meet

Kevin. Always great to get your take.