Key Indicator Hints America Is Headed For Its Worst Real Estate Crash In History

To receive our daily Business/Stocks newsletter to your email here is link

Folks every once in a while there’s a headline that just gets yeah and this one did okay key indicator hints america is headed for its worst real estate crash in history and uh yeah this this one definitely got me so i was kind of skimming through it right now and i thought let me go ahead and react to this we don’t talk a lot about real estate on the channel we

Usually talk about stocks every day in the market right but at the end of the day we can’t deny that real estate has been going insane recently absolutely insane the you know pricing of real estate has gone nuts rents are going nuts and probably will continue to as long as real estate continues to go up right home prices continue to go up and a lot of folks are

Looking at this including myself and thinking are we destined for a crash or are we just destined for things to kind of mellow out chill out a little bit what we do know is the way real estate prices have been going up that is not sustainable right that is completely ridiculous and so i thought let’s go ahead and react to this let’s see if this article has some

Truth behind it some bs behind it um and kind of give my perspective so if you guys enjoy this is always a reaction to an article usually we do reactions to videos if we ever do reactions but this one’s to an actual article and let me know your opinion in the comments section if you think we’re going to set up for a real estate crash correction nothing we’re going

To continue the the upward trajectory on i would love to read through the comments and uh yeah i hope you guys enjoy this always make sure you’re subscribed and also we got the email newsletter now for a hungry bowl so if you want the business stock crypto news delivered to your inbox every day check out pin comment that’s absolutely free to do so already guys

So let’s get into this right a shockingly large price bubble appears to have formed in the real estate market although it’s impossible to predict economic crashes with certainty a key economic indicator suggests the u.s housing market is on the verge of an unprecedented crash one that could end up being the biggest in america’s history following the 2008 stock

In real estate market crashes the federal reserve democratic-led congress and a presidential administration george w bush and barack obama began an unprecedented effort to pump new dollars into the financial system and to a lesser extent the economy at large the strategy behind the flood of quantitative easing government takeovers stimulus checks and government

Welfare programs that followed was that the fed working in conjunction with congress in the white house needed to prop up the economy to keep it from sliding completely off the cliff right and you know this is where you get in this great debate all the time where it’s like how much should the government be involved how much should the fed be involved whenever the

Economy gets into a rough spot obviously we we you know had a massive crash in the stock market back in march of 2020 the fed helped save that whole situation helped save the economy a lot of folks are like you know i know some people that are like no we should just let it keep crashing and it’s like okay you know do you want like 30 unemployment like you know if

You want people in in you know bread lines like what do you want in these sort of situations so you get in this tough situation where it’s like the fed’s bad but then like if they don’t react do you want that actual real devastation for years you know do you want five years ten years of of devastation in the economy that’s a big question right and so that’s a

Tough part one of the primary tools the fed used to accomplish its goals was keep interest rates at near zero for years on end from 1980 to 2000 the federal funds rate fed’s fundraise the primary driver of interest rates economy wide rarely dropped below four percent it was common for interest rates to be five percent or higher and sometimes it was like fifteen

Twenty percent like some insane numbers by the way however from 2009 through 2016 interest rates were consistently much lower than one percent beginning in 2017 the first year donald trump’s presidency the fed began a more aggressive rate hikes right the economy was obviously on stable terms but it only briefly topped two percent in 2018 and 2019 before the fed

Once again slash rates to near zero as part of its plan to address the uh you know effects of basically ronirona lockdowns when interest rates are kept low it’s easier for governments to spend more money than they take in because debt is cheap additionally banks and other financial institutions are more likely to lend money out for high priced items this is one

Of the reasons why it gets hard for the you know it to ever see super high interest rates again and when i say super high interest rates basically i’m talking about anything over five percent because the federal debt now is so insane that you gotta understand every little one percent up is so much more in interest that the the government has to pay in that scenario

It’s absolutely insane never mind that if you if you were to put interest rates at you know uh 10 15 20 percent you know yeah real estate would be ugly uh car sales would be ugly everything you know loans and we’re a very debt-ridden economy nowadays um taking out loans and those sorts of things so if you’re also pull that back uh it would get ugly really really fast

See also  Oil Price is BELOW ./! Oil Prices Go Negative! What Now?

Right the real estate market is is especially sensitive to rate changes because a home is usually the biggest purchase a person will make in his or her lifetime and the vast majority of purchasers rely on large mortgages to complete the purchase absolutely interest rates are key in that whole subject especially if you’re talking about somebody that’s um cutting

It close right like let’s say somebody that has um you know two thousand dollars a month for a mortgage well shoot if they don’t have more than that two thousand dollars they’re going to be very dependent upon whatever the interest rate is at that particular time if it’s somebody that’s buying a house and they’re not even close to it interest rates don’t matter

That much but let’s keep in mind most people that buy a house are cutting it close right they’re cutting it close it’s not like there’s a wide margin between what they can afford and what the interest would be or something like that right when interest rates are kept extremely low people can afford to take on more debt because monthly payments cost less as a result

Sellers increase their prices yes and no when it comes to that sellers can only increase their prices if there’s really that sort of demand out there in the supply is low during that that particular time it’s not like just as simple as interest rates are low so i’m jacking up the price it doesn’t really work like that this is one of the reasons the real estate market

Crashed so hard in 2008 following september 11 2001 the fed kept interest rates low encouraging people to take on higher than usual levels of debt especially in the real estate market it was obviously a really really big push you know everybody should own a home and those sorts of things and it was great for the real estate market until it wasn’t and awesome jobs

Were lost and then it got ugly really fast right rather than learn it’s a lesson from the 2008 crash the fed doubled down on this failed strategy and then tripled down during roni ronan response congress and the white house were all too willing to cheer the fed on since lower interest rates have helped them gain gain and expand government programs without you know

Basically begging foreign governments to finance u.s debt and you know they definitely have a point there i’ll just say that as a result of these policies a shockingly large price bubble appears to have formed in the real estate market the average sales price of a home in the fourth quarter 2021 was 477 900 compared to 403 900 in the fourth quarter 2020 and 384 600

In the fourth quarter of 2019. that’s a 93 300 dollar increase in just two years by far the biggest increase ever recorded in just 24 months further the 12-month home sales price increase for the second third and fourth quarters of 2021 were all above 17 the highest hike you know basically recorded in all three quarter periods since 1963 the earth the earliest in

The fed’s data you know was made available that’s extraordinary what that basically tells you is real estate’s gone stupid i mean it’s just completely stupid like you know that’s so unsustainable it’s not even funny right like you’re not gonna keep seeing you know 17 17 17 percent you should usually expect real estate to go up you know and obviously it’s market by

Market but usually what you should expect is real estate will increase two to maybe six percent a year and then once again that’s dependent upon the market what’s going on in that market right in a city that state whatever um you know what jobs are there how the economy is doing at that particular time what interest rates are it depends on many different factors

But usually you should expect real estate over time to go up two to six percent per year when you start talking about 17 quarter and quarter out now this they’re saying there’s things that are wrong out there let’s just put it that way okay put simply americans have literally never seen housing prices skyrocket like this and are now for this long period of time

And every time they have approached the numbers we are seeing in the past in the 1970s late 80s and early mid 2000s there was a massive real estate or stock market crash that soon followed or both there appeared to be no exceptions other than a few rare cases where housing prices increased quickly immediately after the crash had occurred determining the size of

A market correction is extremely difficult but if the 2008 crash is an indicator of what’s in store for us today then if the current real estate bubble pops soon as all bubbles of you know end up basically popping it could end up being the largest real estate crash in history and keep in mind guys in the uh you know 05 0607 time you know when it when it came to

Getting a mortgage man they weren’t checking anything they were just like you know you tell them hey i make this much this much this much they were just giving you loans out there like you know if you know anybody that was getting mortgages at that time it was like cake right and i don’t know if you guys ever seen the movie the big short before is like the the

See also  INDIVA Limited (TSXV: NDVA)

Scene where he’s in the strip club and you know the stripper is like talking about she’s got five houses and this and that and that’s what it was in that market if you talk to anybody that was in the real estate market at that time that’s exactly what they’re going to tell you you know it was so easy to get loans multiple mortgages and those sorts of things i can

Tell you this market is not like that at all i’ve as somebody that’s gotten a few mortgages over the past few years and i can tell you man they go they go through every little line item and they want to see this and they want to see that it is i can tell you it is not like it was back then when you just tell them oh i make this much and you know they’re like okay

You’re good for it no no no okay so if you want some some comfort in this situation you’ve got to understand what was going on at that time was totally different than this time also the other thing you gotta understand is during this time a lot of people were signing up for what’s called variable interest rates so which meant essentially it you know the interest

Rate could also spike massively that happened for a ton of people and also they couldn’t afford their homes right now we have what’s called fixed rates and that’s what’s customary out there and so when you have a fixed rate mortgage you know if you’re at three percent you’re gonna be at three percent for the next thirty years if you’re on a thirty year right or if

You’re at two point eight percent for a fifteen year you’re at that for the next 15 years there’s not a situation where all sudden you’re like oh i was paying 2.8 but now i’m paying 8.8 it doesn’t happen like that so if you want some comfort that’s definitely some comfort on you know and i think that should be you know set out there the bubble that developed from

2002 to 2007 peaked at around 47 price increase before plummeting by 20 from 2007 to the first quarter of 2009. if we see a similar pattern emerge for the bubble that has been developing roughly since 2012 then and by the way it’s bubble in his opinion okay or this gentleman’s opinion it doesn’t mean there’s absolutely a bubble that’s a bubble in his opinion very

Important to remember these sorts of things when you’re reading an article like this right then we would see housing prices drop by 30 to 40 percent over a two-year period that’d be a big drop whatever the final numbers end up being the evidence is clear in their opinion based on data reported over the past six decades america appears to be on the verge of an epic

Real estate crash as painful as such a correction would be it is likely necessary the price increases we’ve seen seeing in recent years are are primarily the result of inflation and reckless monetary policy not real economic growth they say okay once again um the pushback of that is if you’re there’s a lot of supply and demand challenges out there right now where

A lot of markets are just aren’t home so people have to kind of bid up these homes and you got you know i i go to a lot of new uh developments right with new homes and those sorts of things just to kind of keep an eye on the real estate market because i think it is important to keep an eye on it right you know what i see out there consistently is if there’s a new

Home site going up they got 10 15 people bidding on the the next lot to come out essentially right and not because these people are just like they got way too much money so like oh i’m just going to bid on that it’s because people are looking for a house they want to buy a house they got a job that pays dot dot so they can afford that house and there’s there’s a

There’s a tight supply out there in almost all markets i see um and especially a lot of the big markets that really drive things and so when you’re in that sort of environment prices end up going going up it’s not because people are necessarily going out of their way to buy 10 houses or something like that it’s just you know if that’s what you got out there for

Availability you’re going to bid it up right and imagine you’re somebody that you know uh you would usually go after a more expensive home but you’re looking at home prices so high right now that maybe you come down right and you’re bidding on a home that you wouldn’t have usually bid on so now the people that are coming up to that price point meet you there and

All of a sudden you guys are in this competitive battle you got more money than them you can help bid them in this situation so it makes for a tough environment when it comes to that however there is a chance that housing prices will not drop or drop minimally if the fed decides to continue to keep interest rates low which is likely and low meaning under five percent

Okay despite the ongoing inflation crisis it might prevent a real estate crash the size and scale of the one discussed above it will come at a cost though more inflation even bigger market distortions and perhaps the collapse of the dollar oh gosh okay the collapse of the dollar if i had a dollar for every time i heard collapse of the dollar i would have so many

See also  Why my Investing style is the BEST! | Modern Long Term Investing

Dollars i would be the federal reserve gosh okay i mean just literally that’s always like the thing the collapse of the dollar the collapse of the dollar i like literally i’ve been in in the financial game since 2008 2009 you know the amount of times i heard the collapse of the dollar is ridiculous regardless of what the fed does in the short term it’s clear that

America’s disastrous monetary policy chickens are coming home to roost prepare accordingly they say okay so in my uh opinion in regards to this okay let me let me let me state a bunch of facts no not facts opinions of mine okay based upon everything i look at is now a great time to buy real estate not in my opinion if i had way too much money right now which i don’t

Because i spend so much dang money on my hungry bowl company uh like all my cash flow just goes there essentially but if i had way too much money right now would i be out there buying real estate extra properties right now no okay a couple years ago different situation i was happy to do that right now no no i’m good like i don’t care if i had an extra 10 million

Dollars in the bank it’s not like i’m like i gotta go buy some real estate today no no no no okay um real estate what i’ve witnessed kind of happened over the past let’s just go let’s talk about the last two years okay is i watched real estate uh not really do too much in 2020 for the most part until the very end of the year but what we watched is the stock market

Bottom in march of 2020 and then start to skyrocket from there right and it had some big dips but mostly it just skyrocketed right meanwhile real estate was kind of chill 22 at the very end of 2020 and going into 2021 that’s when real estate really kicked it into gear okay now what also happened also in valuations of a ton of stocks started to drop starting around

You know they kind of peaked out around january of 2021 but then starting in february and march of 2021 a lot of stocks started falling dramatically and we all know that that follow this channel right 50 60 70 80 moves downward just disaster right meanwhile real estate just kept climbing and climbing climbing in the sky everything’s got more expensive to build a

Home so that’s one of the reasons prices go up low interest rates definitely help uh people have good jobs wages have been um you know going up and we’re in an economy where you know it’s not hard to get jobs right now right and so you have all those sort of factors so people are wanting to buy homes and then you got a low supply out there it’s going to bid the the

Prices of homes up ultimately in that scenario right but what we could end up seeing out is real estate is it could be a lagging indicator in this and in the middle of this year and in the back half of this year we could actually see real estate slow dramatically and maybe we even get to a point where real estate prices believe it or not start to come down i think

The first thing you’ve got to see is real estate prices start to moderate i think the earliest you could probably see real estate prices start to moderate is probably around summertime right around summertime you can start seeing some real estate prices moderate now if that moderation goes into um an actual drop that’s where things could actually get intriguing

But the one thing we do know is the move up in real estate that’s not sustainable you can’t keep having prices go up 17 20 25 some of these markets are up 25 30 in the past year it’s not sustainable people end up just not being able to flat out afford the homes and wages aren’t going up fast enough to offset that in that sort of scenario and so and what ends up

Happening is real estate goes down the good news with that is you know if if there’s a lot less buyers out there because they just can’t afford real estate then the supply starts to go out there that’s where you can get an interesting dynamic where you know uh basically the buyers go from this massive disadvantage in the market to actually being an advantage in

A market and that can happen in a matter of a 12-month span it can it can happen i’ve seen it happen in the stock market i’ve seen it happen in the real estate market where buyers go from massive disadvantage to massive advantage and it happens it happens fairly quick just real estate seems to lag the stock market overall so that’s my opinion on that let me know

What your guys opinion is on on the real estate do you think prices are going to come down do you think they’re going to moderate do you think they’re going to continue to skyrocket for the next year or two we’ll love to hear from you guys in that comment section as always i appreciate you joining me much love don’t forget to subscribe and sign up for our daily

Newsletter the hungry bowl it’s absolutely free check out pin comment down there peace

Transcribed from video
Key Indicator Hints America Is Headed For Its Worst Real Estate Crash In History By Financial Education

Scroll to top