The Housing Market is about to Flip.

hey here's the latest on what's actually happening with the real estate market

and what could happen going forward for those of you curious about what's

happening now some of you have been asking me Kevin why is it that areas

like in Phoenix Arizona where Open Door is losing seven uh losing money on 70 of

the listings they're trying to flip why is it that certain areas like Boise

Idaho or parts of Florida are seeing so much more of a dramatic downturn

potentially here in real estate than other areas and a lot of this is simply

explained by the reversal of covet Trends right when we had the pandemic we

were working from home so we may as well work from home from an area of cheap

housing and cheap living and cheap state income taxes some of that is reversing

now as companies and corporations are requiring hybrid work where people move

back and closer to where corporate campuses are now in some cases like for

example at Sunrise Florida you actually have headquarters of companies like

American Express moving there uh or have moved there in the last five years and

are encouraging hybrid work from those locations so typically people would want

to live around those but other areas just don't have that luxury for example

potentially Boise Idaho doesn't necessarily have the luxury of

suggesting that sure no matter what company you work at you can do hybrid

work here because oh wait we don't have your office over here so some areas as

we expect the entire real estate market in the United States to slow down some

areas are going to slow down faster than others so it makes sense that if

somebody wanted to cherry pick just the ugliest news of course some areas are

going to slow down more than others but what I want to understand is it's what's

sort of happening on a nationalized basis and a broad basis because that in

my opinion gives us a smoothing out of what's happening with Cova Trends and

instead just lets us know what is the direction that real estate is going in

nationally now we know that a lot of real estate is based on what happens

with interest rates and what's really neat is you could see that on this

particular chart right here you could see real estate prices for 2022 while

they do seasonally tend to fall as we saw in 2021 and 2019 around the summer

months we have seen a little bit more of a decline here in real estate prices in

2022 so far from 392 to about 367 366 here uh right around the lows

that works out to about a six percent decline in National real estate prices

now what's actually really neat about this though is that we see this plateau

in home prices falling here at the beginning of August

and what's neat is when we look at mortgage rates we actually have this

plateau of mortgage rates right around the beginning of August so look at that

right as mortgage rates plateaued or around the time that mortgage rates

started coming down since it generally takes about 30 to 45 days for Real

Estate to close as we saw mortgage rates peak in June and then start trending

down real estate prices actually plateaued

and they flattened which is really really neat because it shows that ah

okay maybe we only see about a six percent decline in real estate prices

Nationwide when rates around five percent now the problem with that is

rates have recently moved to about an average of 6.7 percent that is of course

not yet reflected in this chart here in prices because it takes again 30 to 45

days for these deals to close but where you can actually see that sort of pain

of these higher yields or higher rates being priced into the market is right

here you click on Little Price drops category here and look at this folks if

you just look at 2022 which is the black line here you

can see that property listings and price drops were highest right around the

first week of July which is right when sort of interest rates were at Peak and

we're starting to come down that's when interest rates were at their highest

levels in the summer and that's when price drops were at the highest level

then we had sort of this bottoming here the first week of August and that's when

price drops relaxed and now look folks rates have

skyrocketed again and what are we seeing again

price drops across the board this is a leading indicator in my

opinion that median sales prices are likely to fall again so median sales

prices again here plateaued right after interest rates

peaked and they started going down this actually led to a surge in August of new

home sales because people thought oh look real estate rates have peaked let's

get in now before rates go up again sure enough rates went up again within a

month and so that does mean we probably still have enough National momentum now

with rates up high again to push real estate down a total of 10

to 15 percent now there is some good news there's some good news we have is

that the 10-year treasury yield here has started to potentially Peak again now

mortgage rates tend to follow the 10-year treasure yield and the 10-year

treasury recently hit as high as 3.9 percent almost four percent is what

you're making risk-free on Treasury bonds and when there was an indication

that maybe we have officially hit Peak on these treasure yields we started

noticing them come down now the 10-year is only sitting at 3.6 now anything

above 2.75 is pretty bad for real estate and when mortgage rates peaked in the

summer we were sitting around 3.4 as a 10-year treasury you could actually see

that chart here that we're still a little bit hired now than where we were

in June see that red dotted line shows you we're still a little bit above that

peak in the summer so that does mean we still have a continuation of that pain

that we're having this summer and we'd expect prices to continue fall but the

good news is we've come off the peak with the 10-year Treasury and maybe that

means less damage to the real estate market especially if this continues to

Trend down fast and this is very very important for me to pay attention to

especially but also you if you're thinking about buying real estate

because we are starting a company called House hack it's a startup that will

invest in real estate uh it'll buy wedge deals below market value fixer-uppers or

multi-family wedge deals single-family long-term rental short-term rental multi

everything right you can go to househack.com because this is not a

solicitation you could go there and you can sign up just upload your W-2s and

your proof of income that you're an accredited investor or go to a

househack.com I'm sorry househack.investready.com to get an

accredited investor certification and you can invest in house hack

so uh the beautiful thing about this is that we can watch the 10-year to really

predict what's going to happen in real estate I showed you this correlation

that's nearly perfect between uh real estate mortgage rates and prices and so

if the 10 years moving down and mortgage rates align with the 10-year then as the

10-year moves down we could actually start hopefully hopefully seeing some

optimism that real estate prices have found their bottom so what happens with

this 10 year is going to be critical though because much like any Market this

10-year moves up and down like crazy if tomorrow this goes back to 3.8 or 3.9

percent over the next few weeks we're going to continue to have more real

estate pain for longer if this 10-year treasury yield plummets and goes down to

say two percent we probably will see a very quick bottoming of the real estate

market so if you're wondering how bad is real estate going to get I don't think

looking at areas like Arizona or Boise Idaho or Austin Texas or Florida is

really going to give you the best Outlook in terms of what reality is I

think reality is predicated by this 10-year chart where we sit right now is

painful it will probably mean prices will be down 10 to 15 percent by next uh

a quarter one by March and April of next year however if the 10-year treasury all

of a sudden plummets we could actually see that 10 to 15 percent start creating

a bottoming in the market and we could actually start rising from there and

maybe we end up seeing a bottom in real estate towards the end of this year

December January February much earlier than expected a lot of this is obviously

going to depend on what the Federal Reserve does as inflation does if we get

another bad inflation report and then the federal raises rates even more

aggressively this 10-year is likely to spike again leading to again more pain

and real estate but anyway now you have a clear Outlook in terms of what to

expect for Real Estate if you found this helpful consider sharing the video and

subscribing and we'll see in the next one thanks so much goodbye