The Housing Bubble is Cracking | New Data in Detail

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Well good day subscribers welcome into today’s video what i want to show you is everything i was just looking at essentially in regards to real estate data we are starting to see a lot of cracks in the real estate market and whether you’re somebody that’s thinking about buying a property selling a property whether you’re somebody that’s looking at housing stocks and

Wondering if it’s time to get in those or anything like that i think all the data i’m going to show you in this video is very important to just understand and kind of look at so you can uh understand what’s going on in the market and where the real estate market is likely headed okay and i can tell you it is um no bueno okay and i’ve always felt like this summer

Was going to be the summer where we really started to see a lot of cracks in the real estate market and it’s playing out uh definitely that way okay so i actually want to start in my city las vegas here at the start here and just kind of show you what’s going on here there are 2 688 single family homes that sold in june that’s down 8.2 percent from may and that’s

Down almost 25 percent from june 2021 so yeah i mean when you start talking about numbers are down almost 25 percent year over year that’s a that’s a pretty darn big number that’s nothing uh yeah that’s there’s no small feat right look at this this shows you single family market trends we’re looking at the number of new listings once again this is looking at las

Vegas and um yeah i mean you know we just hit pretty much records right and this is all happening very very quickly like literally just over the past few months is happening right look at availability just skyrocketed up here recently so when you’re looking at things like this you’ve got to understand if if you have a bunch of new listings coming on and you have

Demand going down in a meaningful way that just seems to be getting worse and worse and worse obviously it’s not a good situation for a housing market if you’re thinking about you know sales if you’re thinking about selling price because eventually if you have all this inventory building up right and you have demand going down what has to happen prices have to

Start coming down and coming down in a pretty meaningful way look at this here this is very important this is very telling the luxury real estate market in las vegas there were 147 homes that sold in june for 1 million and over compared to 167 homes a 20 home decrease okay now the reason i think this is important is think about the usually the most sophisticated

Buyers of real estate it’s going to usually be at the the luxury market right those folks are usually always going to have the most uh you know educated realtors to kind of represent them in these situations right they’re usually the ones that pay the most attention to what’s going on in the market and if you’re thinking about a group that would think about timing

The market a little more right it’s definitely the luxury end because they’re dropping several million dollars they usually have businesses or investments and so they can kind of see everything that’s going on and so if that market starts to pull back right it’s definitely something that i think everybody else starts to kind of look at and like luxury luxuries uh

Pulling back here what do they know right what do they know i think that’s um yeah i think that’s that’s definitely an important factor right now americans are cancelling deals to buy homes at the highest rate since roney roana started the share of sale agreements on existing homes cancelled in june was just under 15 of all homes that went under contract according

To a new report from redfin that is the highest share since uh 20 since early 2020 okay and so cancellations were about 11 percent one year ago so cancellations are definitely rising um quite substantially and you know that’s showing no signs of kind of slow slowing the slowdown in the housing market competition is giving home buyers room to negotiate which is one of

The more reasons for backing out of deals says the chief economist at redfin buyers are increasingly keeping rather than waiving inspection and appraisal contingencies that gives them flexibility to call off the deal if issues arise during the home buying process home builders are seeing even higher cancellation rates even before the sharpest increase in rates in

June cancellations and may jump 9.3 percent in a survey of builders so okay so we’re seeing even cancellations from home builders now and man this is all playing out pretty darn quickly then this is just the early innings of this game right i mean remember six months ago we were still in a red-hot housing market so think about how much things have changed in just

A month span we went from a red hut housing market to literally all sentence like cancellations going up inventories going up everything’s going you know getting worse and worse and worse by the month buyer remorse and cancellation shortly after contract are increasing builders state buyers are nervous about the potential recession struggling to get comfortable

With higher payments or expecting home prices to decline okay so this is all playing out very quickly right in front of us now the consumer confidence and i’ve shown this in a few of my stock market related videos is you know through the floor right now it’s in a very bad place and the reason this is so important when it comes to real estate specifically i mean this

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Is important for the overall economy and you know consumers spending money out there but this is very very important for real estate i think this is one of the most important things for for the real estate market overall and the reason being is think about it like what’s the biggest purchase almost every single person ever makes in their life for almost everybody

It’s the home right it’s buying a real estate property and now whether it be one that they actually live in or whether it be for one to try to rent out right and so here we are in this moment in time where consumer confidence is pretty much the lowest we’ve literally ever seen since they’ve been doing that right from the michigan survey there and so we’re in

This situation where folks aren’t confident if they’re not confident they’re not going to go out there and spend money on real estate that’s just bottom line and the more and more unconfident they get right the more and more they’re gonna like i you know what i don’t really need to go buy a new home right now i’m gonna just stay wherever i’m at whether that means

To rent or whether that means in their current home or anything like that because they’re not confident and if you’re gonna buy a new home you usually have to be pretty darn confident to make that decision at the end of the day now this is from realtor.com this is active listings so basically in june we just went up almost 19 percent year over year now listen

To this this is going to blow your mind that number there that’s the highest increase on a month-over-month basis we’ve ever seen and on a year-over-year basis that we’ve ever seen and so that’s incredible that’s absolutely incredible like for that rise and so what this tells me essentially is a lot of folks are are looking at the real estate market and kind of

Thinking oh boy i’m hearing prices are starting to fall i’m hearing demand starting to fall i better i better list that property i have right and so that’s a situation we obviously have playing out and when you have the the highest rise on a year over your basis in active listings that you’ve literally ever seen i think it’s definitely something worth taking note

Right and imagine as the snowball gets worse and worse and worse right if that happens over the summer and the july numbers come in even worse and you know demand’s just not there you’re going to see even more and more properties hit listings right now if we look at u.s housing starts this is a situation where you know housing starts obviously very recently have

Gone you know to pretty darn high levels we’ve only seen a couple time periods in history where housing starts were higher than now right now couple you know if we’re looking at a couple time periods in the past these are very important okay this time period here this was when baby boomers were all basically moving out of their parents homes right all during this

Time and like were starting to go have families and get married and those sorts of things because remember the baby boomer generation which is just a massive generation right those folks were were born between 1946 and 1964 okay so during this time period of the 70s and early 80s all those folks were moving out of their parents homes and you know there was just a

Big need for housing during that time they were having kids and and life was going on right now the other time we saw you know new housing starts the united states of america go to these sorts of levels was obviously during the housing bubble and that was its own huge situation i don’t think i need to go over the whole history of the housing bubble and everything

That happened there but we all and we all know how that ended right it ended uh yeah not not in such a good place and you know to even get back up to normal levels for housing starts it took years because we got so over built we got so overbuilt it was insane it took years to get you know even back to somewhat normal like housing starts essentially right and here

We are recently where housing starts have gone insane now think about this for a moment i think this is very important for everybody think about this if you have a new home that’s being built right usually what you’re going to do is you’re going to sell your old home either because you want to or because you have to that’s what most people do right every once in

A while somebody might keep their old home and use it as a rental or something like that right but for most folks if they have a new home that’s being built they try to sell their own home so with housing starts being incredibly high right now and all these new homes you know about to be delivered over the next six months let’s say for instance there’s going to

Mean a lot more homes in basically almost every single market especially the ones where there’s a bunch of new homes being built right now right that means there’s going to be a ton more used inventory that’s about to hit the market right and in a situation where demand is not there right now it seems to be getting worse and worse as as time’s ticking on here in

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22 and as you already have listings kind of skyrocketing you potentially could have a ton more listings come over the next six months now compound that with potentially a lot more cancellations for you know folks if they’re looking at these new homes and they’re like going to cancel contracts right and also think about this a lot of these folks that are gonna are

Supposed to have these new homes built that are going to be delivered three months from now six months from now nine months from now these folks paid sky-high prices right because they signed off either at the end of 2021 or the beginning you know a few months of 2022 right and so those folks if they see the real estate market get considerably worse they might

Be in a situation where they’re like uh you know what we’re we’re not gonna we’re not gonna do that whole thing right even if maybe we lose a deposit here or there yeah it’s not worth it for us and so that’s definitely something to consider there right and the the one elephant in the room we’re not even talking about is if we were to get in any sort of situation

Where unemployment climbed in a meaningful way so meaning unemployment went up to like you know i don’t know five percent or something like that we’ve been in the threes let’s say went to five something by the end of this year and that might not happen we might not see job losses like that but if it did um that’s just a that’s an elephant in the room that that makes

Everything far worse if that was to happen and one of the reasons real estate dropped so significantly and housing starts dropped so significantly was not just that build up of inventory during the housing bubble but that was also compounded with a lot of folks that had lost jobs right and couldn’t afford their homes anymore and uh canceled a lot of contracts that

That home builders are obviously building during that time okay now if we look at the united states housing starts month over month we just had a significant drop off and actually this is this shows you the month of may we don’t have the june numbers quite yet this was like a 14.4 month-over-month drop-off in u.s housing starts during the month of may that’s the

Biggest we can find other than rate when we were in the uh rona panic let’s call it that right when everybody was uh you know there was kind of there was basically from march and april you know everybody was super scared of the stock market everybody was super scared of real estate and so you know u.s housing starts dropped off a cliff right there but other than

That one time period in the past five years we’ve never seen a month-over-month decline that’s substantial in housing stock and housing starts and i don’t think that’s going to necessarily slow down i think that’s going to continue to be in a bad place for for at least this year i don’t want to predict out to 2023 yet but i think that’s going to be in a bad place

For at least this year right now mortgage rates are i don’t say everything when it comes to housing jobs are are the most important factor if you want to talk about the housing market right the second most important factor is the 30-year because almost everybody that gets a house gets a 30-year it’s very common right or maybe you get a 15-year but at the end of

The day like you know all those rates can kind of move together right so the third year has has gone through the roof i mean we haven’t seen the third year go up to these sorts of levels that we’ve been here recently over the past few months we haven’t seen it here since before the housing bubble went okay that’s the last time we’ve seen mortgage rates where

Where they are currently and so this is something that obviously gives folks uh you know pause pause for concern and think about this for a moment if the stock market was to be in a worse place so let’s say earnings season wasn’t all that then the 10-year could jump more the 30 which would essentially make the 30-year mortgage go higher and higher and that could

Be a situation where folks that you know or just get priced out of the market because a 30-year just keeps going up and up and up and remember with folks that are building these homes right now some of them don’t have their rates locked in and so all of a sudden they could be in a situation if that you know yeah they could afford it when the home was started back

When the you know mortgage was three percent but then also if you’re talking about double that can they still afford it i think that’s a big question right and i think that’s something we’re going to get an answer to over the next few months here and you know especially when it comes to cancellations and remember if a home builder somebody cancels a home uh that

That’s you know near completion well the home builder is going to finish that and they’re going to put that on the market right and so then that inventory competes against that home builders uh inventory in terms of like you know somebody building the next house it also competes against all the used homes now right and home builders can sometimes be pretty aggressive

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With pricing depending upon the situation it just depends right now in terms of all the housing stocks you know they’re all obviously down this is a one-year chart or just give me this actually a year-to-date chart you know polti kb lennar told ccs all these guys are down right they’ve started to come back recently very very recently as we saw the 30-year not only

Moderate 30-year mortgage that is but actually trend a little down here we’ve seen these stocks start to come back but the issue is um i i don’t think you know just the 30-year coming down a little bit is the magic fix i think the 30 years got to come down quite a bit more to start to ease and get any bit excited about the housing stocks right and i just that’s a hard

Situation to kind of see in the short term the good news for the home builders is lumber has come down quite dramatically and so that’s obviously good for the home builders now let me explain something about incentives so when home builders are going through let’s say a tougher time getting sales they start doing incentives okay and what i’ve seen consistently is

Home builders home builders six months ago were doing almost non-existent incentives because demand was so strong their backlog was so strong it was like we’re not doing any incentives like good luck trying to negotiate with a home builder in 2021 that was near impossible challenge okay like if you went through that process you know how tough that probably was for

Negotiating right right now what i’m seeing consistently is more and more home builders doing incentives i will say i haven’t seen them get desperate with incentives i haven’t seen them get to that point yet now if new home sales remain weak and housing starts remain weak over the next several months they will get to a position where they’ll have to start getting

Desperate right and incentives will have to skyrocket the incentives just to move properties at that at a point in time right which if you’re in the market for a uh let’s call it a new build well that could be an interesting moment if you’re in the negotiation leverage and i can just tell you like for you know about an 18-month span folks were not in negotiation

Leverage when it came to buying a new home and you might actually get one of those opportunities in the back half of this year and into 2023 if the real estate market continues to deteriorate but yeah i’ve definitely seen a lot more incentives from just about every single home builder it’s just i have not seen them get uh quote unquote desperate yet they haven’t

Quite reached all that level okay now average sales price you know for a home sold i mean i don’t think it takes a rocket scientist to figure out this sort of parabolic move is not normal housing prices should go up over time right and it should just kind of have a steady rise but when you start looking like you know your tesla stock or something like this okay

You you’re not normal at this point in time it becomes apparent that there’s an issue there’s a problem that something went wrong in the housing market and what went wrong in the housing market obviously is hey let’s slosh a bunch of money out there like crazy let’s you know a situation where demand rises and supply is just very very limited at that given time and

If you put all that together with pretty much the lowest interest rates we’ve ever seen right and all the stimulus money and all the money pump out there will shoot you know that’s going to be very very bullish for real estate prices during that time the problem is we have everything that was going for us in the real estate market is now working against us right

We you know no longer are mortgage rates at historically low numbers now they’re the highest they’ve been pretty much since before the housing bubble popped now we’re in a situation where the demand is going away insanely fast so quickly month after month after month right and supply is going through the roof so yeah it’s an ugly situation for real estate for at

Least this year for at least the back half of this year and potentially into 2023 um which is kind of it makes sense right this type of stuff is not normal but like i said the the one wild card is if we actually got job losses if we don’t get any meaningful job losses the real estate market will just continue to be in a cold place for a bit if we got job losses

Compounded that’s when you talk about eight actual um let’s just call it full-on collapse at that moment right and uh that remains to be seen hope you guys enjoyed this hope you enjoyed this this data and things like that let me know if you enjoy a video like this i usually focus most my time on stock market but i look at you know all these different economic things

And yeah let me know if you got value out of this much love as always and have a great day and by the dip and never trip

Transcribed from video
The Housing Bubble is Cracking | New Data in Detail By Financial Education

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