If you're unfamiliar with real estate check out my programs on building your wealth with real estate, i have a zero to millionaire real estate program and a black friday coupon code. That expires at 11 59 pm on friday check out all the programs on building your wealth link below hey everyone kevin here. I just got a notification in the bloomberg terminal, and this is something that i really want to start paying attention to and it has to do with the real estate market. Listen to this u.s homeowners have a cushion with cash out refinances.

Now i want to read you some of the statistics here, because we've got ourselves a little bit of an inflection point. First things: first, you got to know that real estate home prices have skyrocketed. We've seen rents go up like five six percent year over year, but home prices have gone up 18 to 25 year over year. It's absolutely nuts.

We also thought that real estate prices would slow down because they generally always seasonally slow down around this time. In fact, if you go to the redfin data center, we don't need to pull it up right now. We've talked about before. If you go to the redfin data center.

Usually, if you look at 2018 and 19 more normal years, you see home prices go up in march april and may and then starting right around the school season. In august september october, you start seeing home prices go down. We saw literally the same trend this year. We saw the up and then the slow kind of inflection down as you go into the winter months, but something changed all of a sudden home prices started going up again, which is breaking the typical trend, and it's a sign that real estate is still a hot Hot commodity and the real estate market continues to heat up, even more, which is crazy, because, just when we thought we were on normal trend now it's getting even hotter.

It's nutty anyway. Now listen to this. Okay, oh before i mention this one of the things that has been so spectacular about this real estate. Uh movement is that individuals have not been loading up on substantial levels of debt and what happens is if debt stays the same and prices go up.

Then your safety net actually increases because if there's going to be a real estate crisis that leads to a lot of foreclosures. Well, that's going to require a lot of people to be upside down, but right now you've got a less than two percent of people that have negative equity. You'd have to have somewhere around a 15 percent decline to see about five percent of people be upside down. It's nominal people have so much freaking equity right now, it's crazy, but anyway, listen to this there's plenty of room for more cash out mortgage refinancings, blah blah blah that could provide a cushion for u.s consumers grappling with faster inflation.

The use of cash out refinances has climbed. Recently, 25 percent of fannie freddie mortgage-backed securities in september were cash out. Refinances 25, so 25 of mortgages in september were people taking money out of their homes, one in four mortgages where people going wow we've made so much money, let's take money out of our homes and then presumably buy crap or put it into the stock market. You're borrowing it like 2.8.

So why not risky, though? Okay, listen to the next one: okay 25 in september 28, in october 30 in november, and all three of these top the average of 20 that we've seen since the beginning of 2020.. The share of borrowers increasing their loan balance by at least 5 rose to 51 of all refinances in q2, up from 38 in the prior quarter. Now we're still significantly down from the 89 percent that we saw in 2006, where 89 percent of borrowers were taking out more money. But this is actually an inflection point to where now the sudden we're seeing people go, we're seeing people basically say wow.

Well, we're not getting stimulus anymore. The stock market's just zooming, hey kryptos, done great this year, hey we kind of feel like buying stuff and going on vacations and stuff's more expensive. Now you know what let's get the hammer, get the hammer break the piggy bank and go shopping? That's dangerous, though, because now that means the equity cushion that individuals has have starts to shrink in the real estate market, the more debt you have in the real estate market, potentially the more consumer spending we get in the short term. The more the stock market moves positively in the short term.

Today we had an insane beat on consumer spending, which was phenomenal and unexpected people are very very happy about this. I was blown away by this and i was honestly kind of blindsided by this. I thought after stimulus started fading. We wouldn't continue to see this kind of crazy spending, but no people are finding money and folks they're breaking the real estate piggy bank is what's happening now now, look i'm still bullish on real estate, i'm a long hodler on real estate, i'm 85 percent long in The stock market uh - you know i've got a 12 hedge in the stock market and then i've got another what three percent in cash uh.

I am overall, very, very bullish on this market, but this is. This is another one of those little red flags. You're kind of like okay, all right, it's it's, you know not horrible. I mean people still have equity.

We don't really have concerns. Yet if price is falling, but it's something we're going to want to pay attention to, because if the federal reserve does decide to accelerate the taper and all of a sudden, we start seeing interest rates go up sooner because inflation's higher for longer because supply chain shortages Are lasting longer and are more painful and then all of a sudden we could start seeing drawdowns, potentially in real estate, where we potentially start seeing people decide. Okay, maybe it's time to start selling real estate, because things are getting a little too bubbly it's possible and who knows it could remember, look here's the thing, there's no easy way to say this, but i think i'm just going to try to simplify it as much As possible, the easiest way to create a bubble is with debt and the easiest way to ruin. The growth of asset prices is with the popping of the debt bubble.

Look when bitcoin was sitting at 33 000. This summer i made a video saying crypto's about to explode for this reason, and it was that the levels of debt outstanding on bitcoin were very, very low and bloomberg was estimating that if debt skyrockets, we could easily easily skyrocket back to over 60 60 000. For a bitcoin, it's literally exactly what happened, but the more debt you have in an asset system, the more at risk. You are of a rapid and quick collapse.

I get concerned about over collateralization, you see it with stable coins. You saw it in the 2008 financial crisis. People are like, oh, don't worry about stable coins. This is just borrowing just like banks used to do or currently do just like the traditional financial system yeah.

Well, we saw what happened in the traditional financial system in 2008. Okay, when the real estate bubble won't poop now do i really expect the real estate bubble to pop anytime soon, because some people are refinancing at a higher rate? No, but i do think that this is going to create some very interesting manipulations in the marketplace, because it'll probably lead to larger consumer spending and more investments in the stock market. So if anything, this is actually bullish for stocks and negative for real estate. In the longer term, but for now it's something to pay attention to the percentage of people doing cash out refinances, which, for those who aren't familiar, keep in mind also, if you're not familiar with real estate, i have an entire course dedicated to investing in real estate.

It's called the zero-to-millionaire real estate, investing course check that out, link down below black friday, coupon code, expiring uh friday evening at 11, 59 p.m. But anyway, if you're not familiar with that. Basically, if you let's say you buy a house for a hundred thousand dollars and now it's worth two hundred thousand dollars, and originally you put twenty percent down, so you had an eighty thousand dollar loan. You put twenty percent down twenty thousand dollars down right now.

It's worth two hundred thousand dollars. You could refinance it again with twenty percent down. You've got eighty thousand dollars of equity in the house. You could take that eighty thousand dollars out leave forty thousand dollars into it.

You pay off your first loan. Now you have a total of a hundred sixty thousand dollars of debt. You left 40k of equity in there boom. Now you just put another 80 grand into your pocket because your real estate went out.

This is just an example of 100k property doubling right and just to clarify. If you buy something at a hundred thousand dollars, you have an 80 000 debt position. You actually have 120 000 of equity, but you're taking out an extra 80 via cash out refinance and you're, leaving 40 in as essentially your down payment. But a lot of that is is funny money because it was just the market appreciating anyway.

This is a little bit of an inflection point. It is something to pay attention to i'm not concerned yet. Oh no, my sticker fell off. I had a little concerning sticker right here and it's gone now.

Oh well, anyway. Thank you so much for watching this. We'll see in the next one goodbye.