The Real Estate Crisis is Worsening | Collapse in 2023.

hey everyone it's me kevin i've got my

real estate mic flag over here because

we gotta talk some housing today there's

some news and some three really

important things that we got to talk

about i'm coming from this little fancy

box phone booth thing at the airport

because i'm flying back from vegas

i won in poker yesterday and i'm really

happy about that thanks jeremy

anyway okay so let's go ahead and get

into some of the things here so first

just across the board right we know that

home price is already falling and the

united states home prices have fallen

about five and a half percent since

march it's no different in other

countries canadian home prices are down

for their sixth straight month

down 7.4 percent from their peak in

february which was just a month before

our peak swedish home prices are down 11

in stockholm for example since march

and you're even seeing fears now that

the uk housing market is going to

experience a similar sort of decline

with consumer confidence turning

negative solely because of fears that in

the short term housing is going to drag

the entire market down in the united

kingdom and a lot of this obviously

makes sense because mortgage interest

rates have been skyrocketing the freddie

mac survey of mortgage rates just for

the first time broke six percent just

came in this morning just a few minutes

ago actually at 6.02 percent that's the

lowest survey most of the surveys are

showing that people are getting average

mortgage rates somewhere between 6.3 to

6.8

pretty remarkable and south korea just

had its biggest monthly drop in housing

prices and again it all just relates to

rates so there are three big things that

we have to understand when it comes to

housing and are we looking at hey you

know because i see the comments right

some folks are like hey but we've had so

much in housing gains so much in the way

of housing gains like hey a little bit

of a fall isn't a bad thing right it's

just a little bit of a fluctuation we

don't need any kind of fud from you

kevin that the housing market is in

trouble that's fine

but there are a few very interesting

things happening let's break each of

these down

number one

one of the reasons interestingly we're

still seeing even though inventory has

doubled in most areas we're still seeing

relatively low inventory one of the

reasons we're still seeing relatively

low inventory is in my opinion because

of this psychological impact of rates

skyrocketing there's a really

interesting thing that happens and i

learned this as a real estate broker

working with individuals and i've spoken

with people today who without me

prompting them have come up with this

same argument and so people have this

really interesting rationalization they

think

oh well if mortgage rates are rising

then i better get in now

before rates continue to go up now a lot

of people get priced out purchasing

power is down like 35

but interestingly that actually helps

some properties still continue to sell

and it's a really interesting phenomenon

because when you look at the consumer

the university of michigan consumer

inflation and mortgage rate expectations

you end up finding that consumers think

that mortgage rates could go as high as

eight and a half percent i don't believe

that mortgage rates will go that high

but it's very interesting because it's

actually leading folks to gobble up a

little bit of leftover inventory in the

market now what's interesting to know

about that is it ain't gonna last

and that's because once mortgage rates

settle and actually stay above six

percent four months two months three

months four months probably somewhere

between three to six months is what i

would expect uh we're going to see the

removal of those sort of better get in

before rates go to 10 like they used to

be you know better get in while the

rates are still single digits i think

you're going to see a removal of that

sort of buyer from the market and then

you're going to be left with a market of

buyers where

there aren't that many buyers anymore

and they're able to afford 35 percent

less than what they were previously able

to afford right that instead of a 500

000 home loan is about a 313 000 home

loan that's a huge impact now that

doesn't mean prices are going to come

down 35 and i don't think they'll come

down 35

but it does mean that we do have this

really weird sort of and even though

prices are trending down we have this

lingering impact of buyers coming in

going oh well i better get in now

i don't know how much longer that can be

sustainable and usually that ends when

people perceive year-over-year home

values falling so that's actually

another really important thing to

consider is that we have not seen

year-over-year home prices fall in the

united states yet

our peak for home prices will probably

end up proving to be about march of 2020

and you're not going to see a year over

year decline of home prices until march

of 2023 so even though on the month over

month basis we're seeing declines which

totally makes sense with what's going on

with rates you actually have this

potential that you're not going to hit

real fear in real estate until march or

april and that's when all of a sudden

the people who are thinking about buying

are not only faced with oh man 35

percent less purchasing power but now

you're offsetting this can't lose

optimism of well might as well get in

now before mortgage rates go to double

digits oh

you know you're going to replace that

with

earner

your prices are falling or maybe i'll

wait right and it's usually that that uh

like over fear or just the fear of the

media and all your neighbors and

everybody talking about oh prices are

coming down it's usually that fear that

perpetuates further declines in real

estate and so this is exactly why we're

launching for example house hack

currently only for accredited investors

the startup but in the future it'll be

for non-accredited i'm working on the

paperwork i promise i'm working on it

because i see your comments i know you

want to be part of it go to

househack.com to learn more about my

real estate startup but uh look one of

the most important things that we want

to remember is that fear point is

probably going to come somewhere on

march and april that's when we're going

to get peak fear now

there is also the belief

that mortgage rates and especially the

federal funds rate will actually stay a

lot higher and uh stay at a higher level

for a lot longer and this is sort of

part two as of last month

the market and even still to some degree

today the market has relatively been

pricing in the federal reserve is going

to slow down their rate hikes uh we're

not going to see that here on the 21st

it's going to be another 75 bp hike 80

chance of that it's gonna be what it is

uh but

the market has been trying to price in

this idea that the fed's gonna pause and

then after they pause they're going to

you turn to the downside and actually

start dropping rates in the middle of

2023 i hate to say but i don't think

that's realistic at all i think the

federal reserve is going to have a hard

time getting this really broad-based

sticky inflation where just everything

is going up

down to two percent because remember

that's the federal reserve's goal is

getting everything down to two percent i

do think we're going to see some very

quick declines in j in inflation i think

very quickly we're going to be able to

go from eight percent to the seven to

the six to the five percent range but i

wouldn't be surprised if kind of like in

weight loss we end up hitting some kind

of interest or a cpi plateau where like

for example let's say you lose 30 pounds

and you're like i really want to lose an

extra ten but you just can't like you're

just not moving off of your weight

because your body's like look man

anything below this weight either i'm

gonna make you eat more or i'm just

gonna shut your metabolism down and

you're just gonna fall asleep

you know so it's kind of it i wouldn't

surprise me to see a little bit of a

plateau with cpi where it's like hey

we're at four and a half percent

inflation and you know it's december of

2023 and jerome powell is like guess we

gotta keep rates at four percent until

we get inflation down to two percent you

know

so that's going to suck for a little

while longer

and the longer we stay at sort of a flat

but high level of the fed funds rate the

more permanent damage we see to the

housing market you could track this on a

chart by looking at the 10-year treasury

right the more you look at the 10-year

treasury the more you see that above

2.75 the more damage you have to the

housing market the more permanent that

damage is to the housing market

so we're going to see not only in my

opinion the eradication of this sort of

uh uh-huh it's better to know before ten

percent raise you're going to see that

go away when real fear actually sets in

in march i remember when i became a real

estate agent uh back you know and when i

started the process back in 2010

everybody around me is like oh my gosh

why would you want to get into real

estate everything's going down it's so

terrible and real estate did continue to

fall when i had just started but it

bottomed in 2011 to 2012 real estate

takes a lot longer to bottom and it was

really the best time ever to get into

real estate and that's what i thought

then as well i'm like these numbers are

amazing like we we said the buying

window is way open back then because you

could literally borrow 100 of your

payment and cash flow a lot

that's a little trick you use the buying

window to determine if you can borrow

everything how positive or negative are

you on a payment if you rent out the

property

uh i think we're gonna have a little

buying opportunity coming again anyway

so at number one we have that uh that

can't lose optimism right that we're

gonna see that fear in my opinion set in

q1 of 2023 then we've got this higher

inflation for for longer that plateau

that's probably going to keep mortgage

rates higher for longer which means more

damage for real estate but there's also

a third psychological thing that i want

to talk about and this also comes from

brokering experience i think psychology

uh in money is very very important this

is why i sell programs that are heavily

based on psychology whether that's

building your wealth in real estate

becoming zero going from zero to

millionaire in real estate property

management being a real estate agent a

very very critical psychological impacts

in all of those programs you can check

those out link down below with the

coupon code seed there are also programs

on building your wealth through stocks

but the the psychological item we want

to talk about here is that there are

some arguments that are being made that

current sellers won't sell because

they'd have to rebuy with higher

interest rates and it's true if you have

an interest rate of two and a half or

three percent why would you sell right

now and take a six and a half percent

rate well you wouldn't that wouldn't

make sense but

this is where that argument falls apart

in my opinion and in my experience most

owners of real estate are older we're

talking about 45 to 65 year olds even up

to 75 year olds on average right your

average real estate owner is older it's

not the gen z's it's not it's barely the

millennials right it's the older

generations they hold the most property

and so what's fascinating here is if

older generations

look at this cycle and they start

getting that fear you know tucker

carlson and anderson cooper going oh my

gosh you're every year prices have

declined to you know 10

or whatever and then we get actual fear

in the market then what you might get is

a situation where older generations say

you know what i actually have my nest

egg in real estate their retirement

funds basically in real estate i don't

have time to huddle and diamond hand i

don't have time to wait for the real

estate market to bottom and then recover

maybe i need to sell now so that way i

can preserve my nest egg and i think

you're going to see a lot more of that

so you'll see less capable buyers with a

reduction of purchasing powers

of purchasing power less willing buyers

because even though they might expect

rates to continue to go up they'll be

fearful of prices coming down but then

you also potentially are going to see a

lot more willing sellers when we

actually get those year-over-year

declines in q1 of 2023 because you're

going to get those older demographics

that say i just need to lock in the

money that i've made because i might not

have time to go through another cycle so

all of these things point to really big

opportunities to buy real estate in my

opinion in 2023 and 2024 and now is the

time to get your w-2 income as high as

possible get your self-employment income

as high as possible start taking less

deductions pay off your debt any kind of

debt that affects your debt to income

ratio pay it down student loans card

loans

credit cards whatever don't go into new

debt and folks get ready to buy real

estate and if you're intimidated by real

estate check out the programs on

building your wealth do this for a

living we've got a beautiful startup

that's going to take advantage of

all of this and we've already raised

over 12 million dollars in just four

business days for this startup we're

really excited about that again working

on non-accredited soon so if you're not

accredited investor yet don't worry i'm

working on something special for you

thanks so much for watching and we'll

see you soon bye