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Will the housing market crash in 2022.
Investing
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⚠️⚠️⚠️ #RealEstate #Housing #Investing ⚠️⚠️⚠️
Will the housing market crash in 2022.
Investing
📝Contact Information for Kevin & Liability Disclaimer: http://meetkevin.com/disclaimer
Videos are not financial advice.
Hey everyone me kevin here in this video we're going to talk about the housing market. I haven't done a housing market update in a while and y'all know. Real estate is my favorite pastime. I've got over 20 million dollars in real estate personally invested, so i got a lot riding on what happens in the real estate market.
I've also got amazing programs on building your wealth through real estate, investing finding deals below market value and professional property management advice so that you can save lots of money, renovating homes and even have partnerships with low so check that out link down below. So you get special discounts. There pays for the program pretty much anyway check that out link down below. Let's not talk about the housing market, okay, so a few things we got to talk about all right, so housing headwinds.
We want to talk about positives and negatives and how these things might affect the market. So, first of all, there's a lot of doom and gloom about the repo market about how oh, once mortgage forbearance is up everybody's going to get foreclosed on look. I called this nonsense during the pandemic because, quite frankly, it is nonsense. Most people going through mortgage forbearance aren't getting foreclosed on afterwards they're adding to the loan they're they're forbeared money, basically to the back of their loan and potentially they're even refinancing from 30-year fixed rate debt to 40-year fixed rate debt effectively lowering their monthly payment.
It's kind of like having a let's say a seven year: car loan versus a three-year car loan, your payment's a lot less right, sam and you pay more interest over the life of loan. But your payment goes down. So really we're not expecting like a boom in foreclosures from the pandemic and, quite frankly, the data is showing that right now we've had uh 23 203 foreclosure starts in january. Those don't necessarily mean that they will translate into foreclosures, but those have started the legal proceedings.
Oftentimes when people see foreclosure, they start paying their mortgage, so this doesn't necessarily mean you're going to get this kind of inventory on the market, but uh. This is. This seems like it's up a lot. In fact, a lot of the sort of fear mongers like to say, oh, my gosh foreclosure - starts - are at 23 000 they're up from 10 000 foreclosure starts have doubled, since you know, and then they'll pick some date during the pandemic, like june or july 2020, when We had foreclosure bans right, i mean you could say: oh my gosh we're up 400 from certain periods of time during the pandemic, but this is stupid.
We should be comparing two before the pandemic and we actually have 50 percent fewer foreclosure starts today in this january. Uh of 2022 than we had in 2020 so way way fewer repos. Now we are starting to see some headwinds for housing starts. A lot of this, in my opinion, has to do with lumber.
So, for example, the canadian housing market had uh housing starts fall about three percent in december and uh. We have a lot of numbers coming out this friday in the united states. We're expecting housing starts to actually fall as much as 7.2. In january, in the united states and existing home sales to come in 1.3 percent on a month over month, decline, we're expecting this decline here, so existing home sales likely to decline this friday and uh housing starts expected decline. Quite a bit. Part of this has to do with the fact that lumber's been skyrocketing. We just saw lumber skyrocket 10 in just the last two weeks alone. A cnbc released an article today talking about how this is adding about nineteen thousand dollars to the cost of a home which keep in mind the median home price in america is about three hundred fifty thousand dollars.
So that's a that's a pretty pretty penny there i mean that's, that's a big part of the profit margin for a lot of these companies and lumber prices have just gone to the moon uh. So so here are some things to consider. Here are some other things to consider over. Here, though, is that, right now we have 11.3 fewer listings year over year, which, when you have less inventory it well less supply means more demand right and prices actually get driven up.
So, even though we're seeing a little bit of a slowdown in new builds we're not seeing new inventory from foreclosures and we're actually selling we're listing fewer homes compared to 2021, so in other words, that's supportive to home prices. Still going up, i mean less inventory. It's more expensive to build homes, it's gotten so expensive to build homes, we're actually building less of them, so less inventory again less inventory actually coming on the market, uh, and so of course, prices are right now trending nowhere, but up uh. We've also we're flat on the pending sales territory, which means we haven't seen pending.
Sales fall because of prices going up. This would mean well. If we saw pending sales fall, it would mean that buyers are starting to say. You know what it's getting too pricey to buy.
We can't keep buying you start seeing pending sales fall, that's a little bit of a red flag of a market starting to cool. Now we did have eight point: nine percent fewer sales in january, though that is uh also just like this flat pending sales here. This is a little bit of a sign of potentially a little bit of relaxation from buyers, but it could be because our supply is lower and that's a little bit of a problem, because not only is our supply lower, but prices are up about almost 14 year. Over year, so we're not seeing much movement in pending sales coming down.
Price is up 14. As a result, we've had about nine percent fewer sales and we're listing fewer properties and all of this together, this entire little section here together, along with less repos and less starts and higher lumber prices. All of this means bottom line less supply, and the assumption here is that this is going to increase prices, but there's a problem and we're always going to talk about problems. Okay, what makes prices go down? Well, mortgage rates, so when mortgage rates go up, they put downward pressure on prices and we've got a little bit of an issue here. Okay, so what we're gon na do is we're gon na look at the brown here. The brown shows us what's happened with mortgage rates. Just since december 31st, we've gone from a 30-year fixed at about 2.8 to a 30-year fixed at 3.9 percent, and we don't expect this pace to slow down. This has already slowed down the number of people refinancing homes.
Less refinances might potentially lead some folks to sell, but we don't really have a good correlation there. Less refinances usually just means people have less cash to buy other things, like potentially rental properties, which could help reduce some of the crazy demand we've seen, but could also mean people just have less money to spend on boats or cars or clothing or on stocks. So we're seeing refinances decline and this makes sense there might be a brief surge of refinances, as some remaining people were like crap, i forgot to refinance at 2.8. Let me quickly refinance at 3.9 before we go up to 5.
That could happen, so there could be a little brief surge in refinances, but, like i mentioned here, we're already seeing mortgage applications fall about 8.1 percent, so this is going to give us, even though we've still got this tight supply. This is potentially going to lower our buyer pool so potentially fewer buyers here, as these mortgage applications are declining, which makes sense because rates are going up when rates go up, fewer people can afford to buy. Now. You do still have a lot of buyers in the process.
In fact, some buyers who are pre-approved right now are saying you know what i need to hurry up and get in before rates go up even more, and this makes a lot of sense. So in the longer term, i'm going to put lt here longer term you're, going to see less buyers, but actually, in the short term, you're going to see more buyers. So you're going to have this really weird thing happen in the short term. I expect to see more buyers with less supply, so higher prices so prices in the short term.
Because of these things probably up like if somebody's wanting to sell a house now, they could probably still do quite well in the longer term if we get less buyers. Well then we get a question mark. What do prices do? Well, it depends less buyers but still increasingly less supply, maybe those balance each other out. But let's talk a little bit about rate trajectory so for us to try to figure out where rates could go.
We got to look back at this chart and try to overlay it to what happened in 2018.. In 2018, the 10-year treasury went from 1.5 all the way up to about 3 right now. The 10-year treasury sits right here, and mortgage rates 30-year mortgage rates tend to trend with the 10-year treasury. So if we assume that we follow the same pattern of what happened in 2018 and the 10-year treasury rate goes from 2, which remember, it was just 1.5 december 31st, it skyrocketed to 2.04 today, and if this goes all the way to 3, then we could reasonably Expect mortgage rates to go to about 5? This is what happened in 2018.. Now, what implication did this have on pricing? Remember in 2018, we didn't have high inflation. We didn't have recessionary, fears right now. Markets are pricing in the potential for a 50 chance of recession. Over the next year, that's quite substantial: we didn't actually have those fears in 2018 and we had rates rising in a non-inflationary time and inflation was like one and a half percent no big deal.
It was just a matter of trying to get back to a normal policy stance now if we looked at 2018 as the most recent example of hikes in the 10-year treasury, when we last went to about a three percent 10-year treasury, we know that mortgage rates ran To about five percent got it, so what did that do in the real estate market? Well, in the very very short term, in the span of two months, real estate prices lost about 12 from their peak in about two months, but that was very, very, very short term. That was for about six to ten weeks and we started seeing a rebound. So this was actually really neat because, by the end of 2018, real estate prices ended up three percent. So even though we went through this, this maddening rise in interest rates.
There was still so much demand and enthusiasm and euphoria for real estate. The real estate still ended the year up three percent and we did actually start seeing rates normalized closer to 4.25 to 4.5. Now, why is it that you could see such a dramatic move in real estate prices? Well, because of a rule of 10x see when interest rates go up about one percent, we expect that purchasing power tends to go down about 10, so for every one percentage point increase in rates purchasing power based on individuals, mortgage their principal interest, taxes, insurance and hoa Dues, their purchasing power there for all that together tends to go down about 10. So it made sense that when we saw this 1.2 percent skyrocket in rates that real estate prices lost instantly about 12 percent, so active listings had their deals.
Canceled active listings had to quickly reduce their prices, and so we saw some drama in the real estate market and a lot of this unfolded really between may and september of 2018, and every area reacted differently, but as an active, real estate broker at the time. This was a very difficult summer. Flips were difficult to sell. It was very difficult to sell anything at what previous properties were selling for, because people just couldn't afford it anymore. But again we still ended the year up three percent. So the question now is uh. What kind of headwind could we potentially face, and how is that going to affect real estate for all of 2022? So what's wild here is this was a move from 3.8 to 5 in 2018, but look at the move. We have right now this delta right here.
That's this line right here this difference. This line right here is a change of not 1.2 percent. It's actually a change in rates potentially of 2.2 percent. We've already had the jump from 2.8 to almost four, so we've almost had this 1.2 percent bump in the span of six weeks.
If we go to a three percent treasury over the next two months, as the federal reserve starts hiking rates and maybe potentially more rate hikes get priced in, we don't know if we're gon na hit that three percent treasury. But if we hit a three percent treasury, that would be a two point: two percent mortgage rate shock uh and that could create a potential negative twenty two percent headwind to real estate. And so now we got to come back up here and say all right in the short term, we might see a lot of buyer demand, but in the long term we might see less buyers in the market. We combine less buyers with less supply.
Maybe those balance out, but do they balance out to the tune of negative 22? If rates went this high, maybe rates, maybe we'll only have that negative uh that negative 12 percent uh. You know effect to pricing, because interest rates end up staying stable at about 3.9 to 4 percent, where they are now that's possible, but if rates keep rising, which folks do expect that they will this. This is the range of our potential real estate headwind. Now this doesn't necessarily mean that prices are going to end down 12 to 22 percent this year because look at 2018 2018 we had this 12 temporary shock and then we still ended the year positive in real estate prices.
So this does not necessarily mean real estate. Prices are going to fall, but this right here is a huge headwind to real estate, and we will likely this year see a headwind of between negative 12 to negative 22 offset again by the fact that lumber's more expensive and we have less supply and fewer people Are listing homes, so we've got some good news helping offset this, which is not such good news, but we've got some more problems. The fact that, right now we have an inflation issue in our country and a wage price spiral that has started which these issues could lead to a lot of fear. Unfortunately, in in our economy in general, if we get fear and spending starts going down, it's likely that fearful folks will also not turn out to be home buyers, even with slightly higher rates.
And if we start seeing buyer demands soften because folks fear that we are going to go into a recession. You could potentially see a little bit of a self-fulfilling prophecy here where people think we're going into a recession. They think, oh, maybe now's, not a time to buy a house, you see less buyers and then you actually see these price drops come to fruition and where the real fear and panic comes is not from my video here. The real fear and panic comes from tucker carlson telling you home prices just went down three percent in one month, and that starts leading people to wonder. Oh what's next, but i think that is only in the confl. I'm calling it the confluence of recession scenario. Right now the economy's killing - it i mean q4 earnings for companies - were amazing. People are spending money like crazy, they're traveling like crazy, disney, airbnb, they're killing it sure there are some signs that things might be settling down and slowing down a little bit, but the economy is doing very, very well.
The question is: will the economy continue to do? Well, if the federal reserve gets really really aggressive against inflation, so bottom line out of all of this, you want to know the one thing to pay attention to in terms of what the real estate market's going to do. It's this right here that word inflation. If inflation continues to soar, the fed has to get more aggressive if the fed has to get more aggressive. This three percent treasury becomes more of a reality and when we get to three percent treasury in a five percent over here, we have a higher likelihood of tucker carlson, telling you the bad news about real estate prices and then potentially, these numbers here becoming a reality.
But these will only become a reality in the event that inflation ends up not being transitory. So if the federal reserve can get inflation down by playing the wait and see game supply chains, catch up, everybody chills out about inflation. Okay prices went up and we're good. Then maybe things are okay, because remember this about inflation.
Folks, if i sell you this pen for ten dollars today and next year, i sell you this pen for eleven dollars. Then we had ten percent inflation right. This was ten percent inflation. Well, if the year after that, i'm still selling the pen for eleven dollars, we actually had zero percent inflation, so you really have to have increasing prices on top of increasing prices.
For this real, this inflation to continue the problem is right. Now we we are seeing this so we'll see where things go. We're hoping inflation starts peaking, maybe in february, maybe in march, maybe in april. If we still have high inflation by then these things are going to become an issue thanks so much for watching make sure to check out the programs linked down below, especially those on real estate, building your wealth.
They come with course, member live streams. Where you can ask me questions directly every single day the market is open. I will gladly look at your real estate deals as well, and folks we'll see the next one thanks bye.
If you admit to being a “flip flopper” you can’t be mad if your subscribers “flip flop” on you. You want to change your dialogue, change your strategy, change your perspectives… your subs might want to change who they get info from
Hope this a crash. Currently under contract on a house
Kev lets go back to the computer and nice background. Unless we are clowning 🤡 Jeremy lol, if so let me make a request for Cramer next lol
Stop showing white boards… stop selling courses… Kevin you getting boring now…. any more of these garbage videos .. I'm unsubscribing
Please collapse I need to buy a house
I'm liking the new style content Kev! 😎
Following from Perth, Western Australia! Much love to you and your followers! House prices here are stupid high too!
The FUDMaster aka Dr. FUD strikes again.. This channel is starting to turn into a FUD channel rather than a stock channel.
Love the new format, very informative
No way housing is gonna crash, as long as you’re not investing, just buy a house to live in, you’re 100% OK
YAY finally! The video I’ve been waiting for from you. Getting a cup of coffee to sit down and watch. 🎉 ☕️
I hope it will. It probably won’t though.
Anyone who hates on Kevin hates logic and wisdom.
How many people gonna say the he got margin called and had to sell the studio
Thought I had gotten my full those of FUD today guess not haha
And my favourite pass time is watching you talk about your favourite pass time.
Please be bearish 🤞🏼🐻 Please be bearish
I bet Kevin is going to be in Millennial Money today.
Kevin only smiles when giving FUD these days. It’s obvious how biased he is, and it seems weird seeing him this way after watching him for so long. It’s lame tbh.
Take off that sketchy looking jacket
I’m liking this new format kev‼️
I feel like you keep talking about all the negative stuff to make it seem as though the fact you sold was a good idea. It’s getting annoying.
Honestly…f off with all your bearish titles and videos…just stop posting at all
HAHAHAH he´s working overtime in green days
Please collapse… The housing prices are stupid
Glad to see you didn’t actually quit Kevin 🙂