O Morgan Stanley Just put out their outlook for what their economists are debating for the economy in 2024, and they actually give a projection of how much real estate prices might crash in 2024. I Was somewhat surprised to see Morgan Stanley Talk about exactly this. and I was also surprised to see them well, uh, you know, say something that kind of we've been talking about before as well. Now just to quickly catch you up before we hit their estimates, the real estate market has started picking up again.

It hit a wall around the end of September early. October One of the reasons it hit a wall was probably because interest rates went up another per. Yeah, it doesn't sound like a lot, but when you go from 7 to 8 and a halfish percent, 7 and a half to 8 and half% it it's an impact. People are like, okay, you know what? This is never going to end.

Turns out a lot of that was probably because you had people like Bill Amman shorting treasuries and playing the market and uh, real estate temporarily took a little Dippy dud law even though it didn't necessarily need to in September I'm talking Super near term. Okay, now it seems like the buyers are coming back out again, but there's very little inventory so you're seeing the bidding wars again. You just had like a little six we breather. What the interesting argument is that I've been making and then you're about to see what Morgan Stanley says this is going to potentially translate into in terms of prices is a Resurgence of inventory in the spring could lead to a decline in prices.

After all, think about this right now. You have low inventory, but you also have low buyers who are capable of buying. So what happen happens if inventory goes down in the winter and buyers go down in the winter? Then all of a sudden spring hits and everybody's like, let's all sell our home now that it's spring Boop inventory goes up, but buyers stay low. That could lead to some near-term softness in the real estate market and could create some nice opportunities to buy.

Morgan Stanley Talks about this and the economy. Let's analyze this. This is a note that they just released here uh, at here: November 19th. As you can see, they just published it as well.

Even though the time there looks like it was supposed to hit a little earlier, this just hit. and we got slowdown. But no recession. In their Baseline scenario.

Our economists expected a significant slowdown in domestic economies with inflation being tamed, but an outright recession being avoided. So now all of a sudden, Morgan Stanley as an entire Bank not just Mike Wilson Saying you know what, probably going to avoid a recession here. And worst case, if we do end up having a recession, we would expect it to be a shallow recession. We've heard this before.

pretty almost redundant. Dare I say at this point Now What is interesting is they touch on China and they admit that they believe or that they overestimated the ability or the willingness of Chinese or China's government to actually stimulate the economy, leading to some of that softness and continued deleveraging that we're seeing in China. It's basically a way saying people are like yo government. You told us to take on a bunch of debt and then you burned Us in the housing market.

Now we're like screw you. we're just going to deleverage and just stay out of debt and the government's like that's fine. We are not going to print money anyway, so screw you too. And so as a result, you have a pretty dang weak China which of course Kenny G says B to dip on yo it's China Let's go.

Okay, that could obviously be debated. They talk about potentially some more positiveness coming to not just bonds, but also agency mortgage back Securities That sounds pretty fancy. Let me just put that very simply for you. Basically, they're saying in this paragraph here that come the end of QT around the summer to the end of 2024, because we've got about 1 trillion of QT left, we're doing about 80 billion.

That's about 12 months and we're totally done right. So somewhere between the end of Qt or the near end, so call it July and November of 2024, They actually think there'll be a lot more stability in the bond market, which could be a buying opportunity today. One argument they're making here, but more relatable to the real estate topic. Listen to this paragraph right here.

Short and sweet to the point. By the way, before I hit this, let me know. Do you like these shorter Style Videos like under 5 minutes? Is this easier for you to digest? I'm really trying my best to provide value where people want it. That's why I Have a politics Channel Down Below Market Open Live streams.

Sometimes closed live streams will be done every day. The market is open starting at 5:25 a.m. Click the link down below. It's not going to be on the channel, so click on the link down below.

make sure you go to that one. Also, there's also the podcast channel, so check out the other channels. But anyway, let me know also about how you like the quick vid. So what do we have here? Us and commercial real estate markets diverg over the course of 2023? Their trajectory in the year ahead is debatable.

Dramatic affordability challenges remain because of high rates. However, looking ahead, here's the line, folks. You ready for this? Looking ahead. this should sound very familiar to something that we've talked about before.

Uh, but uh. Anyway, here it is. Looking ahead as rates come down. What do we expect? Well, looking ahead as rates come down, we expect affordability to improve and for sale inventory to increase.

Okay, that makes sense. Rates down more people can buy and inventory goes up. Us home prices should see modest declines down 3% as as growth in inventory offsets any potential increase in demand. more houses coming on compared to Uh, A.

potentially buyers being available with fundamental stress is still largely unresolved. though. We expect the outlook for commercial real estate to remain challenging. So in other words, if you're really concerned about residential real estate yes, maybe build in another 3% buffer over.

at my real estate startup, we're build building in somewhere around 20% buffers. This makes us relatively insulated. obviously $600,000 house? Uh, 3% is 18K If we're getting getting these things for 150 to 200k on our market value, we think we're pretty insulated. But anyway, I Think it's worth looking at this as basically one of two things.

One think of this as: yes, there's still uncertainty in the residential real estate market. Much of the 10 to 20% crash that we've seen in prices occurred between May of 2022 and December of 2022. in most of 2023, at least January through July prices were increasing. Now this does mean you have to be careful of using July August September Comps: If you're trying to buy a property in Q4 2023.

don't get screwed or misled by those summer comps because prices have come down since then. Morgan Stanley Suggesting we can go down another 3% so just have patience in the real estate market. I Think is the most important thing I Don't think this Market's going to run away from anybody and I think there's plenty of time to take your time. be patient, pick the right property, and don't overpay.

Investors are grappling with heightened geopolitical tension ions. while some Market signals such as the price of oil suggest current conflicts may be Regional the potential for escalation shall not be ruled out. Anyway, there you have it for an about 6-minute video. And now the disclaimer: thanks so much for watching! We'll see you soon, Goodbye and please let me know if you like shorter, why not advertise these things that you told us here I Feel like nobody else knows about this? We'll We'll try a little advertising and see how it goes.

Congratulations man you have done so much People love you people look up to you Kevin P there financial analyst and YouTuber meet Kevin been always great to get your take.