Is Real Estate a Bubble in 2018? These are the most common economic red flags and how they impact real estate prices - enjoy! Add me on Snapchat/Instagram: GPStephan
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Concerns:
The stock market is artificially inflated by low interest rates and it will decline, bringing down real estate. The FED lowered interest rates to record lows to stimulate the economy post 2009. This creates cheap money for businesses to borrow and people to borrow from - and I don’t disagree with this, low interest rates DO artificially inflate prices beyond what would be capable under a higher interest rate. But, my only defense is that we can’t expect interest rates to rise to insane levels overnight to put the economy in a tailspin.
Growing government debt - experts predict we will be reaching 24 trillion dollars of debt by the end of 2018. BUT, about 2/3rd of the debt is owned by US citizens and corporations, half of the national debt is owned by the US, and a large part of that is in social security. Debt isn’t always bad, and in some years inflation is actually higher than the interest rate the US pays - so they’ll actually make money. But overall what matters most is debt in relation to the gross domestic product of the US, and right now we stand just above 100% which is perfectly healthy. Ultimately, taking on more debt is risky - but this has more to do with rising interest rates and how THAT will effect housing prices, than the level of debt itself, as the US would have to raise interest rates to help offset their debt.
The third thing people say is “student loan bubble.” Student loans have gone from half a billion to $1.4 TRILLION between 2007 and now. I do see us having disastrous problems for individuals graduating with debt..but this won’t have a direct correlation on housing prices, from my perspective. With a low supply of homes, there are still not enough properties to meet current demand. Student loans are not “hurting” the market - they’re just not adding to sales numbers as buyers, which is already at a record high, even accounting for current student loan debt. But I agree, student loan debt is awful - but I can’t see this leading to a decline in real estate prices.
Finally, wages…wages haven’t gone up as high as housing prices have, therefore it’s a bubble! This has truth to it, but it’s not the entire picture. It’s true that wage growth hasn’t grown much, although wages HAVE gone up dramatically for highly skilled workers in large cities, and these are the areas that are seeing the largest booms in housing prices. This is big law, tech, engineering, and executives. And because of this concentration of growth, foreign money continues to pour in, further increasing demand. So yes, for low-skilled workers - it’ll be a tough one to go up against, and housing prices are exceeding low-end wage growth.
Positives:
We’re still about 14-20% away from pre-recession prices when adjusted for inflation. This leads me to think that we still have some upward growth.
Interest rates are still at historic lows. We all know interest rates are going to be going up…so locking in now has some insane long term advantages. This creates an urgency to buy like we haven’t really seen before, which should continue to bolster real estate prices.
Limited supply. People aren’t selling. The reason: they don’t want to become buyers. There’s just not enough to go around - builders can’t keep up with demand, building restrictions hinder larger cities from building more housing, and this creates a limited supply of homes to chose from. While many areas are just starting to develop more housing, it’s just not enough, and even though it’s picking up, it’s still a long way from there being an oversupply. This in itself has the power to continue keeping housing prices bolstered for real estate, and real estate investing.
For business inquiries or one-on-one real estate investing/real estate agent consulting or coaching, you can reach me at GrahamStephanBusiness @gmail.com
Suggested reading:
The Millionaire Real Estate Agent: http://goo.gl/TPTSVC
Your money or your life: https://goo.gl/fmlaJR
The Millionaire Real Estate Investor: https://goo.gl/sV9xtl
How to Win Friends and Influence People: https://goo.gl/1f3Meq
Think and grow rich: https://goo.gl/SSKlyu
Awaken the giant within: https://goo.gl/niIAEI
The Book on Rental Property Investing: https://goo.gl/qtJqFq
Favorite Credit Cards:
Chase Sapphire Reserve - https://goo.gl/sT68EC
American Express Platinum - https://goo.gl/C9n4e3
Join the private Real Estate Facebook Group:
https://www.facebook.com/groups/therealestatemillionairemastermind/
Learn my exact strategies to help grow your career as a real estate agent to a six-figure income, how to best build your network of clients, expand into luxury markets, and exactly what you can do to begin taking your career to the next level…these strategies took me to $120,000,000 in sales volume: https://goo.gl/UFpi4c
Concerns:
The stock market is artificially inflated by low interest rates and it will decline, bringing down real estate. The FED lowered interest rates to record lows to stimulate the economy post 2009. This creates cheap money for businesses to borrow and people to borrow from - and I don’t disagree with this, low interest rates DO artificially inflate prices beyond what would be capable under a higher interest rate. But, my only defense is that we can’t expect interest rates to rise to insane levels overnight to put the economy in a tailspin.
Growing government debt - experts predict we will be reaching 24 trillion dollars of debt by the end of 2018. BUT, about 2/3rd of the debt is owned by US citizens and corporations, half of the national debt is owned by the US, and a large part of that is in social security. Debt isn’t always bad, and in some years inflation is actually higher than the interest rate the US pays - so they’ll actually make money. But overall what matters most is debt in relation to the gross domestic product of the US, and right now we stand just above 100% which is perfectly healthy. Ultimately, taking on more debt is risky - but this has more to do with rising interest rates and how THAT will effect housing prices, than the level of debt itself, as the US would have to raise interest rates to help offset their debt.
The third thing people say is “student loan bubble.” Student loans have gone from half a billion to $1.4 TRILLION between 2007 and now. I do see us having disastrous problems for individuals graduating with debt..but this won’t have a direct correlation on housing prices, from my perspective. With a low supply of homes, there are still not enough properties to meet current demand. Student loans are not “hurting” the market - they’re just not adding to sales numbers as buyers, which is already at a record high, even accounting for current student loan debt. But I agree, student loan debt is awful - but I can’t see this leading to a decline in real estate prices.
Finally, wages…wages haven’t gone up as high as housing prices have, therefore it’s a bubble! This has truth to it, but it’s not the entire picture. It’s true that wage growth hasn’t grown much, although wages HAVE gone up dramatically for highly skilled workers in large cities, and these are the areas that are seeing the largest booms in housing prices. This is big law, tech, engineering, and executives. And because of this concentration of growth, foreign money continues to pour in, further increasing demand. So yes, for low-skilled workers - it’ll be a tough one to go up against, and housing prices are exceeding low-end wage growth.
Positives:
We’re still about 14-20% away from pre-recession prices when adjusted for inflation. This leads me to think that we still have some upward growth.
Interest rates are still at historic lows. We all know interest rates are going to be going up…so locking in now has some insane long term advantages. This creates an urgency to buy like we haven’t really seen before, which should continue to bolster real estate prices.
Limited supply. People aren’t selling. The reason: they don’t want to become buyers. There’s just not enough to go around - builders can’t keep up with demand, building restrictions hinder larger cities from building more housing, and this creates a limited supply of homes to chose from. While many areas are just starting to develop more housing, it’s just not enough, and even though it’s picking up, it’s still a long way from there being an oversupply. This in itself has the power to continue keeping housing prices bolstered for real estate, and real estate investing.
For business inquiries or one-on-one real estate investing/real estate agent consulting or coaching, you can reach me at GrahamStephanBusiness @gmail.com
Suggested reading:
The Millionaire Real Estate Agent: http://goo.gl/TPTSVC
Your money or your life: https://goo.gl/fmlaJR
The Millionaire Real Estate Investor: https://goo.gl/sV9xtl
How to Win Friends and Influence People: https://goo.gl/1f3Meq
Think and grow rich: https://goo.gl/SSKlyu
Awaken the giant within: https://goo.gl/niIAEI
The Book on Rental Property Investing: https://goo.gl/qtJqFq
Favorite Credit Cards:
Chase Sapphire Reserve - https://goo.gl/sT68EC
American Express Platinum - https://goo.gl/C9n4e3
This aged well
Great video!
like a fish that lives in the water, you live in the dollar. The Chinese and all other worlds buy dollars from you and then buy your houses, but when your money goes back because of inflation and some trade wars (grateful to Trump), a lot of empty houses will be in your hands or whoever owns them. Just a opinion with poor english
I always look at cash flow as far as buying a rental. In a good economy single family homes usually don't cash flow at all. They are not really designed to be an investment. My guess is once home prices exceed 3 times average area income it goes from being a seller's market to a buyer's.
Bubble right now. Speculators are buying houses.
Hey Graham good content thank you!
I have a situation i'd love your input on.
I make 50k a year and my monthly bills are around $300
That being said I currently save atleast $2000 a month and i am currently at $7000 in my savings.
I am 22 and aiming for $80,000 for my first home, I'm torn between saving up 20% and using a conventional loan or using a FHA 203k loan and doing renovations for a few years and then moving up in the market via selling and buying a larger home. Which option is more wise in your opinion? Saving the 20% and staying in the home until i own it outright or using the FHA 203k to not tie up all of my savings and profit from the renovations?
Would you agree that home prices can double even now due to inflation? How can anyone afford homes in California with homes being so high to almost a million in some areas for a small 1200-1400 sq ft home.
"Let's find out" Thulian perspective 😂
Never realized student debt was such a burden on people i took my GI bill for granted
Does anybody have any resources on localized indicators of a housing bubble/crisis? What I’m wondering is what are some local and regional trends that have predictors for real estate. In my opinion I think large scale “bubbles” won’t happen for a while 5- 10 years but I think local and regional markets will be fluctuating heavily with this administration. Smaller towns are gentrifying because of, the Trump administration and its economic policies and the cost of bigger cities are causing a somewhat “mass exodus” from those bigger cities. Gentrification in my opinion is just making these smaller cities and towns feel more homely to these bigger city populations. I feel like this is causing resources financially and construction wise to be strictly focused on these urban areas that are pricing everyone previously out. Also the people I see moving are tech related and start up kind of entrepreneurs and they don’t actually need to be located anywhere, it’s only temporary. Everyone who owns property are holding on to it with the rising (inflated) prices and taking out loans based on that fact. Once that specific town/city becomes unviable people will move on to the next city that is viable leaving all of the property owners with over inflated property value with loans attached to that causing that local economy to crash. Anyone?
Interesting opinions but every reason you give for there not being a crash was also given in 2006/7 before the crash. The difference this time though is that when it does crash, they won't be able to drop interest rates dramatically to save property prices as in 2008/9. In general, when property FOMO kicks in and everyone jumps on the bandwagon, you know it won't be long before euphoric delusion turns to fear and dread. Property has become a volatile asset. Vancouver, London and various other hotspots are already popping. You bought in 2011 – good move – but to buy now. Very risky indeed…
What about the fha loan u put 3%down
People are not putting 20% down anymore, and banks are throwing money at anyone with a pulse to try to give them a mortgage. I'm looking at buying my first home and the bank tried to get me to take out SIX TIMES my annual salary. Thankfully I know better, but there are some stupid loans being given out.
Graham, any thoughts on real estate in Las Vegas?? Do you think there is a bubble there ??
It'll be a regional thing
Hey Graham, love your videos! I live in the greater Seattle area and the market is going pretty crazy here to say the least. I finally have got my income above 100k a year and am age 26. Working on saving right now but also afraid to buy a house at these all time high prices. My dad did decently well for himself but lost a few 100k back in 08, so I have seen it happen first hand.
Is there any tips or advice you could give me. I just don't want to buy into a house and then for some reason lose 100-200k in value over the next couple years either due to whatever factors may occur. Because I do want to get into renting out properties or multi-family units down the road as well.
Thanks in advance Graham if you are able to reply.
He has the info yet drawing all the wrong conclusions… additionally if I remember correctly, student loan debt can now be excluded during mortgage applications…
I invest in real estate and i believe we are in a bubble (including stocks, bonds). I want a crash so I can invest more.
Still it's all depends on many factors, location, etc.
Thank you for the video. Watched it several times now. So when or what are the signs that it is a bubble or about to pop? Any educated guess?
This guy just made a good argument that there is a real estate bubble brewing.
It's clear you need to do some more historical research. In the 1970"s interest rate rose more than 15% in less than 3 years. So yes interest rates can explode.
Some of these comments….wow… 0% down payment are back…. Real estate; get it while it's hot….. We are all paper rich with debt……. pop pop goes the everything bubble.
Unfortunately companies are require bachelors degrees in the business world, for entry level positions that don't nearly pay enough to live and pay off your student loans (at least here in CA). Think $15 -20hr. Then on top of that they require 2-3 years experience! It makes it hard for people just coming out of college. I have an 80K loan to pay off for my degree and even though I have been working in my field for 7 years now, it is just not worth it. I am trying to get out of renting and buying a home, but my student loan bills are playing a huge factor for me.
This is also why I am in the process of becoming a licensee so I can ditch the 9-5 and make a real living for myself. I too would not recommend you go to school for a degree until you actually know what field you want to go into, and then study the prerequisite for those jobs.
I wish I never got my degree, as I didn't really learn anything new besides the terms/names of concepts that I already understood etc.. from being in the industry.