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below hey everyone kevin here i just got

a notification in the bloomberg terminal

and this is something that i really want

to start paying attention to and it has

to do with the real estate market listen

to this u.s homeowners have a cushion

with cash out refinances now i want to

read you some of the statistics here

because we've got ourselves a little bit

of an inflection point first things

first you got to know that real estate

home prices have skyrocketed we've seen

rents go up like five six percent year

over year but home prices have gone up

18 to 25

year over year it's absolutely nuts we

also thought that real estate prices

would slow down because they generally

always seasonally slow down around this

time in fact if you go to the redfin

data center we don't need to pull it up

right now we've talked about before if

you go to the redfin data center usually

if you look at 2018 and 19 more normal

years you see home prices go up in march

april and may and then starting right

around the school season in august

september october you start seeing home

prices go down we saw literally the same

trend this year we saw the up and then

the slow kind of inflection down as you

go into the winter months but something

changed all of a sudden home prices

started going up again which is breaking

the typical trend and it's a sign that

real estate is still a hot hot commodity

and the real estate market continues to

heat up even

more which is crazy because just when we

thought we were on normal trend now it's

getting even hotter it's nutty anyway

now listen to this okay oh before i

mention this one of the things that has

been so spectacular about this real

estate uh movement is that individuals

have not been loading up on substantial

levels of debt and what happens is if

debt stays the same and prices go up

then your safety net actually increases

because if there's going to be a real

estate crisis that leads to a lot of

foreclosures well that's going to

require a lot of people to be upside

down but right now you've got a less

than two percent of people that have

negative equity you'd have to have

somewhere around a 15 percent decline to

see about

five percent of people be upside down

it's nominal people have so much

freaking equity right now it's crazy but

anyway listen to this

there's plenty of room for more cash out

mortgage refinancings blah blah blah

that could provide a cushion for u.s

consumers grappling with faster

inflation the use of cash out refinances

has climbed recently

25 percent of fannie freddie

mortgage-backed securities in september

were cash out refinances 25

so 25

of mortgages in september were people

taking money out of their homes one in

four mortgages where people going wow

we've made so much money let's take

money out of our homes and then

presumably buy crap or put it into the

stock market you're borrowing it like

2.8 so why not

risky though okay listen to the next one

okay

25

in september

28

in october

30

in november

and all three of these top the average

of 20 that we've seen since the

beginning of 2020. the share of

borrowers increasing their loan balance

by at least 5

rose to 51

of all refinances in q2 up from 38

in the prior quarter now we're still

significantly down from the 89 percent

that we saw in 2006 where 89 percent of

borrowers were taking out more money but

this is actually an inflection point to

where now the sudden we're seeing people

go

we're seeing people basically say wow

well we're not getting stimulus anymore

the stock market's just zooming hey

kryptos done great this year hey we kind

of feel like buying stuff and going on

vacations and stuff's more expensive now

you know what let's get the hammer

get the hammer break the piggy bank and

go shopping

that's dangerous though because now that

means the equity cushion that

individuals has have starts to shrink in

the real estate market the more debt you

have in the real estate market

potentially the more consumer spending

we get in the short term the more the

stock market moves positively in the

short term today we had an insane beat

on consumer spending which was

phenomenal and unexpected people are

very very happy about this i was blown

away by this and i was honestly kind of

blindsided by this i thought after

stimulus started fading we wouldn't

continue to see this kind of crazy

spending but no people are finding money

and folks they're breaking the real

estate piggy bank is what's happening

now

now look i'm still bullish on real

estate i'm a long hodler on real estate

i'm 85 percent long in the stock market

uh you know i've got a 12 hedge in the

stock market and then i've got another

what three percent in cash uh i am

overall very very bullish on this market

but this is

this is another one of those little red

flags you're kind of like

okay all right it's it's

you know not horrible i mean people

still have equity we don't really have

concerns yet if price is falling but

it's something we're going to want to

pay attention to because if the federal

reserve does decide to accelerate the

taper and all of a sudden we start

seeing interest rates go up sooner

because inflation's higher for longer

because supply chain shortages are

lasting longer and are more painful and

then all of a sudden we could start

seeing drawdowns potentially

in

real estate where we potentially start

seeing people decide okay maybe it's

time to start selling real estate

because things are getting a little too

bubbly it's possible and who knows it

could remember look here's the thing

there's no easy way to say this but

i think i'm just going to try to

simplify it as much as possible

the easiest way to create

a bubble is with debt

and the easiest way to ruin

the growth of asset prices

is with the popping of the debt bubble

look when bitcoin was sitting at 33 000

this summer i made a video saying

crypto's about to explode for this

reason and it was that

the levels of debt outstanding on

bitcoin were very very low and bloomberg

was estimating that if debt skyrockets

we could easily easily skyrocket back to

over 60 60 000 for a bitcoin it's

literally exactly what happened

but the more debt you have

in an asset system the more at risk you

are of a rapid and quick collapse

i get concerned about over

collateralization you see it with stable

coins you saw it in the 2008 financial

crisis people are like oh don't worry

about stable coins this is just

borrowing just like banks used to do or

currently do just like the traditional

financial system yeah well we saw what

happened in the traditional financial

system in 2008 okay when the real estate

bubble won't poop

now do i really expect the real estate

bubble to pop anytime soon because some

people are refinancing at a higher rate

no but i do think that this is going to

create some very interesting

manipulations in the marketplace because

it'll probably lead to larger consumer

spending and more investments in the

stock market

so if anything this is actually bullish

for stocks

and negative

for real estate in the longer term

but for now

it's something to pay attention to the

percentage of people doing cash out

refinances which for those who aren't

familiar keep in mind also if you're not

familiar with real estate i have an

entire course dedicated to investing in

real estate it's called the

zero-to-millionaire real estate

investing course check that out link

down below black friday coupon code

expiring uh friday evening at 11 59 p.m

but anyway if you're not familiar with

that basically if you let's say you buy

a house for a hundred thousand dollars

and now it's worth two hundred thousand

dollars and originally you put twenty

percent down so you had an eighty

thousand dollar loan you put twenty

percent down twenty thousand dollars

down right now it's worth two hundred

thousand dollars you could refinance it

again with twenty percent down you've

got eighty thousand dollars of equity in

the house you could take that eighty

thousand dollars out

leave forty thousand dollars into it you

pay off your first loan now you have a

total of a hundred sixty thousand

dollars of debt you left 40k of equity

in there boom

now you just put another 80 grand into

your pocket because your real estate

went out this is just an example of 100k

property doubling right and just to

clarify if you buy something at a

hundred thousand dollars you have an 80

000 debt position you actually have 120

000 of equity but you're taking out an

extra 80 via cash out refinance and

you're leaving 40 in as essentially your

down payment but a lot of that is is

funny money because it was just the

market appreciating

anyway

this is a little bit of an inflection

point it is something to pay attention

to

i'm not concerned yet

oh

no my sticker fell off i had a little

concerning sticker right here and it's

gone now oh well anyway thank you so

much for watching this we'll see in the

next one goodbye