Oh, it's been a minute since we've talked about the real estate market and that's always been mine. bread and butter. Not only as somebody who became a real estate agent at 18, a real estate broker that became a top selling agent in my city uh, by myself without a team I Just provided value for customers that was my trademark meet Kevin the no pressure agent providing more that was my slogan trademark I hung those things off my signs the sign writers uh and so the Real Estate Market is is a place that I'm highly fascinated about and I know a lot of times when I talk about the market people like oh so you're an agent so you're biased I know I don't represent clients anymore I really don't care? uh What uh what happens I like to buy properties below market value by buying fixer-uppers and improving them and those are specifically single family dwellings and it really doesn't matter what the market does, there's plenty money to be made there no matter what. That's why.

I Got a real estate startup called Outside. But beyond that we've got to talk about and that helps us provide affordable rental housing stock. Which is important because not everybody in America is going to be a buyer and you actually need a quality landlord in. my long-term goal is to actually make house act like the most quality landlord in In America because landlords have such a crap reputation because most of them suck.

Okay, uh, intro aside, we had to talk about the market and what's going on at some expectations of the market and some news. So the first thing we've got to pay attention to are mortgage rates. They're at the highest level. In the last year, 10-year treasuries have actually skyrocketed since the banking crisis lows of around 3.3 percent all the way to about 3.74 which has basically LED mortgage rates to go up.

Remember how to track mortgage rates? you just want to Google mortgage rates and then go ahead and set the credit score to the best credit score. You generally get Uh rates under which is 740. some credit unions want 760 but generally 740 and up you're going to get the best credit score, but when you first look at Google you might end up with like a 720 which which will make rates seem even higher. But if every single day you just look at the same rate, you can kind of track what's going on.

And right now the 30-year fix is back over seven and a quarter percent. It's very expensive. New construction home builders are able to buy down this rate and they're the ones who are actually driving. In my opinion, some of the largest amount of housing price appreciation or catch-up appreciation.

That's potentially problematic because first of all, new construction homes have already taken double the market share that they usually have. They're somewhere around 30 percent of all sales are new construction homes. Well, new construction homes typically are sold by Builders who are incentivized to keep the price stable, but just throw more incentives at you to get you to pay the price. So you can actually artificially prop up prices with new construction home sales.

Because for example, if somebody's willing to pay 500 grand for a house with a three percent interest rate, but then they're willing to pay 500 grand for that same house with a seven and a quarter percent interest rate. If they get a hundred thousand dollars of upgrades well as a comp, it still looks like a five hundred thousand dollar sale. even though it technically sold for 400k 100k. Uh, off of that a price for incentives? That's just a rough example.

Obviously, the real math of that will look a little different since it could come in the form of or an interest rate, buy down construction credits, maybe a partial price decline. uh, for for the Builder But all of it together Builders are really propping up the home prices because they're taking a larger percentage of active home sales right now. And that's normal because we are actually in this bizarre time where people aren't selling because they've locked in low interest rates of the past by a 30-year fixed rate mortgages. To some extent, it's possible that the United States housing market may never see an actual real housing crash again thanks to the 30-year mortgage.

Now I Don't want to come across as saying oh, housing's never going to have a correction. We Don't know I Mean, of course that could happen and markets are cyclical, right? The housing market is cyclical, which means it goes up and then it goes down. There's a real estate cycle, but what I do believe is that the 30-year mortgage has compressed that cycle and that wave of the up and down has potentially gotten squeezed. Or at least the Bottom's gotten squeezed by the 30-year mortgage because people aren't forced into selling, even if their Equity potentially goes negative for the short term.

That's very different in the stock market where people get emotional and can trade instantly. Uh, and there's no lock-in period, right? You're almost locked in with real estate with that 30-year mortgage even though you're not. and real estate can have good liquidity if you know what you're doing and you know how to price real estate. Uh, it's surprisingly I mean I sold all of my real estate in the first.

Uh, well, almost all of my real estate I've got five properties left. but I sold about 20 21 or was it 22. somewhere around there, uh, over 20 million dollars of our own personal real estate that we sold the beginning of 2022 and people were saying Kevin There's no way in March and April of 2022, you're going to be able to sell this real estate quickly And wow, within three months it was all sold. Real estate can be surprisingly liquid again if you know what you're doing.

But the argument here is we don't know necessarily that because of this 30-year lockup, that there's going to be some kind of large correction to the downside in the housing market. There is one way the housing market could correct and we're going to go through some some indicators of this and some stories in a moment. But the biggest thing that you want to pay attention to to see if housing is going to correct is inventory. and so far housing inventory has still not risen.

That keeps pressure on prices and this gets set up. Actually the Paradox of interest rates the Paradox of interest rates is the following. Ordinarily when interest rates fall, home prices go up, the factor is 10 to 1. when interest rates fall one percent, home prices or purchasing power by buyers should go up 10 percent.

One percent decline in rates 10 increase in purchasing power. But if inventory goes up 20, you could actually see a net negative. So in other words, the inventory Paradox or this this interest rate Paradox would be as interest rates eventually fall. Will we see more inventory and an inventory normalization which actually puts pressure on prices? It's possible, but nobody knows.

The point is there. It's not a foregone conclusion that real estate is just going to Moon again when rates go up. Now that's not to say that real estate is going to crash, but we're not going to see this sort of covid mooning necessarily as rates fall again, because there's likely going to be an increase in inventory now. beyond that, housing prices are negative year over year.

And let's look at some data here. So housing prices are negative year over year. about three to four percent depending on where you're looking. Now, it's actually surprising because housing prices have done well to somewhat catch up with uh, what housing prices did last year.

The black line is 2022. the blue line is 2023. Had this blue line stayed flat, we would be at somewhere around negative 10 to 15 percent if you looked. Peak at about 387 Nationwide to trough at about 341.

Well, 341 divided by 387 was about okay. about a 12 decline in home prices Nationwide is what we saw Peak To bottom. Well, that's already behind us. and right now, year over year, we're only down about three to four percent in most areas, which is good.

However, inventory is also really dangerously low. In fact I Believe inventory levels are even lower. Uh, than where we were. Let's go to active listings over here.

Where was it there? It is. Uh, inventory levels I believe are even lower than where they were last year. Let's see here this is these are active listings. Maybe we go to new listings? So here active.

we'll go. We'll go there as well. Here are active listings, so we actually have more. Oh, that's it.

that's really interesting. More active listings? That's wait a second here. Active listings? Yeah. a number of active lists.

Oh, that's actually very surprising. Okay, well, we'll look at the data and try to understand it here. Uh, so we're closer to 2021 and the number of active listings that we had here at the beginning of the year. It's possible that at the beginning of 2022 as interest rates started Rising Uh, active listings were somewhat depressed, but this is interesting to me that we actually have a little bit more on the active listing side Right now.

let's look at new listings. How many coming onto the market it? This is where you see less new inventory coming on. You actually have more sitting on than more active listing sitting that you had in 22 and 22.. that's pretty surprising, but it's good to know it's what the data is.

So now here's what's interesting though is: look at this. Here's how it could flip flop. See how we could have an intersection here. If this trend continues for active listings soon, we're going to intersect and we'll be at less significantly fewer listings than where we were last year, for example.

Let's assume this slowly goes up and we go to 800k listings over here. which, uh, looks like it'll be uh, well over here would be around. July Let's say we get up to 800k listings. so this blue 2023 line rotates up a little bit.

we would still be about 150 000 listings below where we were in the summer of 2022.. So you definitely see that shortage. Uh, coming. The shortage here is is either a parent now or coming in.

In my opinion, in order to actually see prices decline more, you would need to see this blue line of active listings go well above both of these lines both above 2021 22. You'd probably have to have over a million active listings in all of the tracked Redfin markets. Okay, so keep an eye on this chart. You could look at this chart yourself.

Just go to the Redfin Data Center and you could look at this chart yourself. So then we jump on over here. Homes in Austin and Boise are selling for 80 000 less than a year ago. Now one of the things that I do notice is that real estate is pretty localized and this has always been the case.

All real estate is local we say after all, Location location right? But if you go to Florida 's actually done pretty well if I go to median sales price. So look at that median sales price. Median sales price as of last month was flat. In other words, no declines in Tampa.

You're just now starting to see those declines that wedge right there. Look at that, you're just starting to see a negative two percent there in Tampa. Just uh. actually that's updated since the last time I looked at it just last week.

Uh, and then if you look at Miami Miami is actually seeing a four percent increase over last year's prices. So Miami doing exceptionally well. Sometimes this happens when the dollar strengthens though people want to park more of their money in America and Miami is one of those unique destinations. Well, not only is it sort of like lately been teamed sort of this crypto Capital but it's always and also a place where you're getting like Citadel moving and stuff like that so you're getting more Tech moving over there.

But beyond that, Miami's always been a place where people from South America have parked their money whether it's from Venezuela or Colombia or whatever and people have mark their money there I grew up in South Florida so I understand South Florida very well. I spent 16 years growing up there and I love Florida but uh, there there there's some. There's a lot of uniqueness to Miami and so it's really hard to pinpoint potentially exactly why you're seeing this. But what you can definitely say is if you look at a, uh, coveted destination, covet destinations have gotten quacked like absolutely reamed.

uh, look at this: Boise 461 your minus 15 year over year I mean you want to buy the dip? look at Boise right now Austin's actually potentially another example. looks like the bottom potentially for Idaho was somewhere around March And if we jump on over now to Austin Texas Uh. Also, about negative 18 from the peak over here uh, which is roughly where we're comparing to now. So as usual, all real estate is local.

so I Don't think this is a terrible surprise that they're pointing out Austin and Boise those are probably more of your coveted recipients that's just pre-accelerated some house price appreciation gains. Housing Market Update: Fewer metros are seeing home price declines as lack of inventory keeps prices afloat. This is going to be very interesting seeing what happens with inventory. That's a reflection of a mismatch between demand and Supply propping up prices pending home sales are down 15 percent from a year earlier, but that's much smaller than the 24 decline in new listings.

Today's elevated mortgage rates continue to discourage homeowners from selling. Nearly all of them have mortgage rates below six percent. This week's average 30-year fixed was 6.39 percent. Uh, that was five days ago, though mortgage rates have gone up since then.

As we saw now, we're potentially over seven percent. Seven and a quarter percent. There are only four Metro U.S areas where it's cheaper to buy a home than to rent Detroit Philadelphia Cleveland and Houston Well, this is because of mortgage rates being so high right now. Uh, how much are home prices rising or falling? The answer depends more on location uh, than it has in over a decade.

Yeah, a lot of volatility. Uh, and look at that. San Francisco minus 10 Miami Uh, what is this up? Uh, 10. Oh, this is a 13 year high during pandemic during the pandemic.

Uh, another thing that we're seeing is rents. Uh, in fact, I had a piece on rents that I wanted to go through. Uh, let's see here. I believe that is Reds Uh, rents are starting to slow down, which is very good.

Let's see if I could find exactly where it was. But basically rent growth. Uh, rent growth? There we go. Rent growth is starting to slow down substantially to where basically rent growth inflation is basically zero.

which is absolutely fantastic. Uh, do we find it here. Rent growth slowed. This piece is from now.

this is too too old. that's from March Uh, So so I I can't remember exactly where it was. But the point is, rent growth has almost hit zero, uh, year over year. and that's really phenomenal.

We want to see rent growth slow down because it's a really big piece of uh inflation. Housing represents an increase uh of 32 percent of CPI to now 34 percent of CPI in 2023. and uh, rents at the beginning of the year have still been growing relative to 2022. But here in May, we're actually starting to lap some of those big gains of last year.

and that's really good for inflation. So if you're looking you know if if you're looking for good news about potentially for the stock market or for inflation, you've got good news in the face. Oh, here it is. I found it.

It's for May 11th. Uh, you've got good news coming in terms of rent inflation and its contribution to inflation. Because look here. look at this chart of rent growth slowing for not only the 11th straight month in April but the year-over-year change is now flat.

Thank God Rents going up was ridiculous. Uh, and if you look over here here, the median asking rents, median asking rents have really flattened and really slowed down. Uh, so so this is this is good, right? It's not only good for normal Americans Who can now afford homes more? uh and I think as the supply and this is actually really important if you're a landlord or an aspiring landlord I Want you to be really cautious of something? A lot of landlords right now are buying properties and they're being sold on these rental comps I Want to be like crystal clear about this so let me just take a screenshot of this and show it to you. Uh, what? I mean by uh, graphically this is this is dare I say the real estate potential manipulation that could lead you to make a mistake in real estate.

So just be careful about this. Be cognizant about this in your calculations. So first of all, when somebody buys a rental property, they almost always overestimate what they can rent out the property for. But in addition to that already Baseline Overestimate that ambitious landlords do.

You're now in a situation where a lot of people are looking at comps from look at this the summer of potentially here August to September of 2022, people are looking at these rental comps and your actual rents are as much as a hundred dollars lower right now than they were here. That's a problem. You want to be careful if you're a landlord because you don't want to get screwed basically. uh, into buying something thinking the rent to say 2500.

But then the rent. You know last year was actually probably 2400 and now it's 100 below that. You're potentially 200 off. That could be the difference between being cash flow positive and being cash flow negative, so be very careful about that.

This is a very good thing for inflation, especially since you've gotten more homes being built and constructed which add to housing stock which is good for affordability. But all of this make does make you wonder hey, when is housing for sale inventory actually going to rise right now? What we're starting to see is U.S Rental rates go up, Their vacancy rates go up, that is. And so something that's interesting about rent is that rents can also have an effect on home pricing because if people who hold rental properties decide, you know what rents aren't going up anymore. I'm not getting what I used to get.

let's sell and you start getting more landlords selling and you get more housing completion from new construction, you could see that inventory increase. Again, you don't see the inventory increase. Prices will probably stay stable or just slowly keep. Rising Again, if you see the inventory increase, that's probably where you're going to get some pressure on real estate, but that could potentially be a good opportunity for you to buy real estate.

Now I have a program called Zero to Millionaire Real Estate Investing where I teach you how to actually analyze a deal to know if you're getting a good deal. The the real Crux of it is not only how to manage a property correctly, but to understand what a good deal in real estate actually is. Is it that cash on cash return or is there more to the analysis hinted? There's more to the analysis Anyway, check that out. Link down below.

Uh, next to the other programs I'm building rough including the how to make more Money and Get Sh9t done faster program on helping you make more money so you have more to invest. so you've got investing, programs on stocks or real estate or property management and then how to make more money which helps you invest more. So uh, you know. With this said, another thing to consider when it comes to rental vacancies is you have to wonder why would rental vacancies be rising And that's because there's something known as negative household formation that's happening right now.

Negative household formation is a way of saying that when people like, uh, you know, a 25 year old after college during Covid used to go out and rent their own apartment, they might now be going back and living with Mom and Dad And let's say both there, there's a brother and a sister doing that. Brother and a sister come back and move in with Mom and Dad. You just took three households and turned it into one that puts less pressure on home buying, less pressure on home renting, which again, could potentially Drive rents and prices down. So negative household formation hurts real estate price growth.

We could all agree on that. During Covid, we had a massive explosion of household formation. people taking a a mom, a dad, a a son and a daughter, and those splitting into three households. That's what was happening after covet or during covet.

Even whereas now the opposite is happening, it's like you're putting the pieces of the egg back together. It's kind of weird. That is a negative on real estate. So the good news for Real Estate is that inventory has remarkably stayed low.

That is a great support for real, estate, and if it stays that way, real estate will continue doing just okay. It'll be totally fine. Yes, some markets are going to be hit more than others like Boise and Austin and San Francisco and markets like Miami are going to continue kicking butt. But if we do get a surge inventory, there might be some opportunities for you to negotiate better deals or be in a position where uh you you actually have more Choice again, which will actually be nice.

hopefully around the same time that rates fall, which will be an interesting Paradox that rates could go down and you might have more leverage over sellers because you'd think there'd be more buyers to offset at that point, right? Maybe maybe not. Especially how many people sort of got hurt during this last recession. If everybody ended up moving to cash, who would have otherwise bought and they missed out on potential stock market gains, then then that's the oopsie dupe season. Maybe because of that you end up having less buyers, but who knows.

Nobody really knows but what we will do and what I will promise is to continue bringing updates on this. so make sure to subscribe share the video if you found this helpful. pay attention to those inventory levels I Think that's probably the number one thing to pay attention to for Real Estate Right now uh, as uh and I Do think we will have an answer by the third quarter of this year as to whether or not we're going to have some kind of rug pull in the economy that's really going to crash housing or for actually going to be in the direction of sticking a soft Landing So we'll see for now I've got to run on over to the course member live stream I Gotta put the link over there I Gotta do that right now. Uh, so we'll go I'm like another cup of coffee.

We'll go live in the course member live stream in about five minutes. That's where we do real deep dive fundamental analysis like we did on Open Door When it was a buck 30 to a buck 50, we said this thing's potentially going to two to three dollars because the fundamentals even though I hate open door or the bullishness we had on Palantirabill.com before earnings join us for these fundamental analyzes, lectures, and learn how I do fundamental analysis on both stocks and real estate link for us now I Want you to know this when it comes to AI Time is what's going to make you money, and if you can prove that value to an employer, you'll always be able to be employed. So this is another way of making sure that you don't get replaced.