So if we see people getting more confident in the economy, then that suggests that maybe a recession's a little bit farther away. Michael McKee Thank you so much! Yeah, that's actually a really good about this confidence in the economy. We're actually getting a lot of talk about that confidence in the economy, especially as how it relates to the housing market. So we've got to provide a little bit of a housing Market update specifically because this morning on CNBC Neil Kashgari touched on the housing market and he talked specifically about an article in the Wall Street Journal about signs that maybe the housing market was slightly starting to recover and how that could actually lead the FED to have to keep Financial conditions tighter again because they see that can consumer spending is heavily correlated to household wealth and so is the jobs.

Market In fact, Neil Kashgari bantered back and forth with CNBC anchors this morning suggesting that hey, maybe maybe it's entirely possible the reason we saw a better employment report than we expected is because and we saw the labor force participation rate rise is maybe some people who had tired which usually retirement is relatively sticky are now coming out of retirement and working a part-time job or whatever and participating with the labor market because they're starting to see their household net worth decline. Whether that's through retirement accounts exposed to the stock or bond market, or the real estate market softening. Who knows, but this idea that maybe the real estate market hit some kind of bottom is very interesting. Now, it's worth noting what's happened with interest rates.

Interest rates were about three. four months ago. we're sitting at about seven to seven and a quarter percent. Right now, we're sitting closer to 6.1 to 6.4 percent.

So you've really come down on mortgage rates and as we know, when rates come down, buyer purchasing power increases. And this is why the Wall Street Journal in part is suggesting. hey, we're starting to see some potential thawing in the housing market. And now this is really interesting because the Federal Reserve pointed out this article.

This is not me by finding this article The Fad Talked about this article Neil Kashgari as we hear or as CNBC or during his interview on CNBC this morning he mentioned this and so the article talks about this decline in mortgage rates. Having more people contacting real estate agents applying for mortgages and signing purchase contracts following mortgage rates have beginning to stir demand or have been beginning to stir demand in the housing market. The average home loan has is come down by just about a full percentage point from its high Above seven, this would be about seven and a quarter to about six and a quarter now, right? And it's bringing some new buyers into the market. Now, this on one hand, could potentially be aligning with the seasonal move that most people who are interested in buying real estate don't actually get serious about potentially buying real estate until January And then they actually don't really start making offers until March This is sort of your spring buying season, right? Most people buy in March most people sell in July It's kind of weird.

You'd think maybe sellers would move that up a little little bit, but that's statistically what we tend to see now. Mortgage applications are up by a little bit. This also makes sense again because rates are starting to fall. The housing market is a barometer for how the economy is responding to looser Financial conditions.

Look at the FED specifically pointing out this article that talks about Oh Financial conditions are loosening and the Fed's like, no, we don't want Financial conditions to loosen Now keep in mind that did lead and the the Federal Reserves concerns about tighter Financial conditions have actually LED Financial conditions to tighten slightly again. especially following that Jobs report that we had just look at the 10-year treasury yield over the last uh, six months here. If you jump to the last six months, you'll actually see that we were sitting at a high on the 10-year treasury around four and a quarter to 4.3 in November which is really about three months ago and we fall into these lows for most of January. But if we zoom in a little bit here just to the last month and and I'll remove myself for a moment, you can actually see we've really spiked up to the highest level in the last month on 10-year treasure yields.

Not quite yet though the highest levels that we've seen the last three months we'd have to get to about 3.8 to see that, but now we're sitting at about 3.66 so you are seeing at least some tightening again in those financial conditions. as the 10-year treasury is really correlated to a housing interest rates mortgage rates. the that has indicated they're committed to keeping rates High until inflation is lower. Willing to risk a recession to do so, They no matter what happens, it's likely to be a slow year for the housing Market Suggest the Wall Street Journal Housing activity remains down sharply from a year ago, and when the FED began to lift, its better.

That's when they started racing rates pushing up uh uh. Mortgage rates? uh. and even though the S P core logic uh case, Schiller National home Price Index is up 40 from three years ago, the housing market has been in its fifth straight month of declines and it's hitting specific areas particularly heartbeat Austin or Idaho and you're starting to see more Builders Try to rush inventory out to Market to actually catch up to make sure they don't end up with even lower prices. Now here's something that's fascinating: If you go over to the Redfin Data Center and you look at Median Home Sales, this is for the entire nation and we can go City by city in a moment here.

But if you look at Median home sales. you know that right now, medium median home sales are sitting at around 347. They've actually declined a little bit already in January Now that's not true for every Market But in just January, you've declined from about 350 to around 347. So about a one percent decline, but 347 if we hold at 347 until about.

oh, call it uh, what do we have here April Yeah, if we hold until April or May, we'll eventually be comparing 347 to about 387 from year over year numbers. And if we look at 347, say prices stay stable divided by 387. that's going to represent a national decline of real estate prices about 10 and a half percent and that could lead to some potential Panic Where all of a sudden now home buyers are hearing that home prices aren't actually Rising anymore, but instead they're falling. And if that, Panic comes at the same time as more home builders list properties for sale.

Because we know existing homeowners are locked into low rates, they're not super interested in bailing out of the housing market. Well, then. uh. But we do have the largest backlog of homes under construction that we've had since 2006, and if those homes start hitting the market, there's a potential.

You could see some real softness in the real estate market come spring and the summer. Unless for some reason, the lowering of interest rates of one percent from seven and a quarter to six and a quarter percent leads to some kind of real rise in prices again. and then that was year over year. Numbers don't look as dramatic I Don't know we'll see what ends up happening, but we can look at individual areas.

For example, if we go to Austin Texas we can actually see you get this slight sort of take up in home prices here in January sorry, followed by a slight decline. So you do have a lot of volatility in these sort of four week measures. But even right now, if we look at 460 right now relative to 571 where we were, you're looking at home prices that are already down 19.5 percent in Austin. If we go to Boise and you can do this on the Redfin data center for any area you want, you can actually see that home prices feel like they're still plummeting.

You're actually sitting at a 444 median versus the 547 Peak a year ago also sitting at about a 19 Decline and still declining. However, if you go to let's say a San Diego you can also see that Austin style pickup in pricing here. And if you go to Tampa Florida you could also see that pricing is still year over year higher, but it's sitting at about 357. Started with a decline in the year 357 is roughly.

Uh, it's actually lower than where we were at the end of last year and it's well off that peak of 394. So let's see 357 divided by 394 puts us at about 9.5 percent declines for Tampa. Now, if we can move up and catch up with this black line which represents last year's data, hey, then you can actually potentially have a relatively flat real estate market with pricing this year. Uh, and and maybe you get less of sort of a fear movement.

So it's very interesting what's happening. But it's also fascinating that the Federal Reserve is paying attention very closely to what's happening uh, to to, uh, the the to the interest rate Market Especially since now a lot of people are suggesting, hey, look, if rates start trending down, let's just buy Now, take advantage of those lower prices and then we could always refinance in the future. Now that's risky because that's what people said in 2007 and eight was, oh, let's just buy a home Now we could always refinance in the future. Not necessarily, especially since you're starting to get tighter Financial Conditions starting to show up at lenders.

A survey by Uh Uh, the Federal Reserve of lenders are starting to indicate tighter conditions for Real Estate lending whether it's commercial, residential, or credit card lending. So you are starting to see Banks tighten up a little bit. We saw Banks tighten up a lot during the Great Recession how much will they Tighten Up Now Who knows. So far they've only tightened up modestly.

We'll see. now going on with the Wall Street Journal article. It actually ends talking about how pending home sales a leading indicator for the housing market rose 2.5 percent in December led by gains in the South and the West. So what does this tell? Well, it really tells us that we don't really know yet, right? We don't know what's going to happen.

but as far as what I can tell, here's what: I believe I Believe that you're by no means going to see a 2008 style housing market crash. The folks calling for that I Think have luster marbles because we are in a totally different uh, and fundamental uh housing market now than we have been previously. Don't get me wrong, I Know housing is expensive and it'd be nice for housing to become less expensive for folks that way more people can get into Home Ownership which I'm a big fan of and those are things that I teach about in my program. So I'm building your wealth link down below and almost on a daily basis.

I'm talking about building your wealth through real estate. but I Don't believe we're going to have any kind of 30 to 50 declines like what we saw in the Great Financial Crisis, specifically because the type of lending that we've had build up our housing market over the last 10 years has been extremely sound. Credit scores that are 100 points higher. No dead people getting loans, No No income, no job, no asset loans.

Instead, you have loans where people have to have the ability to repay. These are mostly fully amortized loans. in America people have locked in their low rates. There's no reason for them to dump out and move.

Sure, you might see more people rather than selling rent out their properties, and that could put some pressure on rents, which might eventually put some pressure on valuations. but we've already seen the pressure on valuations. The real question now, and this is sort of. The lingering question is what is the likelihood that when we have those year-over-year case Shiller numbers come out and the national media starts talking about how oh, no home prices have fallen 10, 15, 20 year over year? Uh, and maybe in some markets they're still falling.

What is that going to mean for a home buyer sentiment? And is it potentially going to reduce people's willingness to buy even a little bit while at the same time, you get a lot more housing inventory from new construction, home builders, or potentially even real estate investment trusts like institutionals? Uh, like BlackRock KKR blacks or whatever, right? The the B REITs These potentially liquidating real estate because they're suffering from so many withdrawal requests. That's possible and it could lead to increases in inventory. Keep in mind, you could have stable uh or low inventory, but if you have less buyers at the same time as you have stable, inventory. what happens? So think about that.

Think about it logically for a moment. Less buyers, but low inventory. Well, if you have low inventory and then less buyers, your month's supply of homes goes up because even at a low inventory level takes you longer to sell that inventory because you have less buyers. But if now, if you have less buyers and inventory goes up because of the builders or the REITs or whatever, Uh oh.

Now you have a real problem with weeks of supply of housing skyrocketing And oh, look at this convenient chart here. That's literally exactly what's happening. Weeks of Supply peaked at the end of November at about 15.8 weeks of housing Supply That's a very, very high level that compares to 2021 when we were sitting at nine weeks of housing. Supply That also compares to earlier in the springtime of 2021 when we had eight weeks of Supply.

So we peaked at about 50 18 weeks of Supply which is about twice as much. But right now, the latest measures that we are and not at 15 at a peak of weak Supply we are actually at 18.3 So weeks supply has doubled year over year. Uh, and if that continues to Trend up, you're probably going to see more price drops. Across The Nation Now the level of price drops.

The number of active listings with price drops did fall into the close of the year. We were at a peak of about 7.1 percent. Price drops as people either canceled listings removed listings at the end of the year. You get a lot of listings that expire at the end of the year, so it's very common to see some kind of listing reset at the end of the year.

Those that listing reset pulled the percentage of active listings with price drops down to 4.6 But I think that's a temporarily a temporary anomaly since most listing contracts are written to the end of the year. Uh, and now you're starting to see those take up again, right? Those price drops take up again. so we're not out of the woods at all. All For Real Estate Not only do you have like, let's try to summarize this Okay, because I think it's worth considering a summary.

When we go through all of these sorts of, um, data points here. The first thing is, you have the FED wanting to keep housing tight. The FED wants housing tight. They mentioned it this morning.

Neil Kashgari talked about an interview that hey, we're looking at this and and we want it to remain tight. The other thing that's happening is the 10-year treasury yield. After the Jobs report started increasing, right? we're back at about 3.6 percent in my opinion for us to really have the green light on on housing. The green light on housing really comes when the 10-year treasury is around two and a half percent.

We'll see. that's just my thesis. Could be wrong, but that's my thesis. The other thing that we've got is we've got uh, probably a massive wave of uh of Supply coming not from your traditional home sellers, but from REITs institutions.

uh, and Builders that's where you're getting massive Supply coming and you're already seeing in those indicators, you're already seeing increases in months Supply And that is that. That measure is so nice. Nice because it includes it considers people buying less or more and inventory being up or down right. It merges those together, so it's a really good indicator you're seeing.

uh, median home prices a volatile volatile for January. It's not a clear up everywhere, right? Some areas, uh, are declining. Some areas are rising, so you were seeing that and will want to pay attention to that obviously. Uh, and on top of that, we, we have no idea.

How is that fear wave Come probably March to May for year-over-year numbers. Actually, it's probably going to be more like March to July because the numbers are so delayed when they come out. How is that fear wave going to affect buyers? What's inflation going to be like at that point? There are a lot of uncertainties, but I would make it very clear. I Don't see any signs of a 2008 Style crash or recession and as long as inflation continues to to blow over, you're probably going to look at Peak pain for Real Estate either it was in December of 2022 or that Peak pain for Real Estate is going to be somewhere around uh, the summer of 2023 to about the end of 2023.

The best case scenarios that we're seeing at least based on what what professionals uh, you know, like those interviewed by Barons who work on the case Shiller indices are saying is probably the best you're looking at is going to be a flat year for 2023 real estate, which I think is pretty interesting, especially as it relates to the housing startup that that we're creating. Let me get you that Barons piece quickly. So the Barons piece on housing yeah, here it is. So this was the Barons piece and we think the housing market.

Let's see. Uh, we think that housing market could help pull the economy out of recession in 2024 Or say these economists interviewed by Barons inventories of completed homes are up completely. So that suggests that home builders are working through backlogs and they actually expect that discounting could start to rise in this spring and summer. and this sort of reiterates that that potential bottom closer to spring or summer where you get sort of peak fear then as Builders really start trying to liquidate homes and keep in mind they can drag down the resale Market as well.

Of course everybody really does think that interest rates are going to be lower at the end of the year, so who knows. Maybe that's either the time to refinance or buy. And if that ends up being the time to refinance, boy, it might be an interesting opportunity to start looking at some of the lenders like a rocket Mortgage or United Wholesale and maybe start making some investments into those sort of stocks assuming there'll be a big refinance boom When and if real estate's do real estate rates end up coming down. Now another thing that I I want to mention is, uh, just briefly.

Obviously many of you know uh and and many of you have been adding to your Investments over the last, uh, a few few weeks here. Uh, many of you know I've got a housing startup. it's called House hack you go to Househack.com read the solicitation there. we expect to have the reg a offering for that.

Hopefully by you know, like at this point it's looking like April Uh, we're submitting to the SEC very soon here. I'm told within the next week we'll see uh when the attorney's ready. but uh, it's very, very exciting and we've uh, over the last few weeks we've we found a model that we think could could really allow us and without going into too much detail here, could really allow us to go from buying wedge deals to buying wedge deals in multiple Cycles So that's really interesting because we think there's a lot of money to be made in buying wedge deals The big problem is most people never end up realizing the profit from wedge deals because they spend it all on selling costs for realtors. Uh, they do stupid work for flips.

They get sued. They don't retain any kind of man management rights. They end up spending all their money on escrow fees and transfer costs and realtor fees. It's insane.

And so we believe we found a model to where we can avoid all of that, but still be able to repeat the wedge deal model over and over again and turn that into cash flow for the company. So we're really excited about that. And right now we are obviously raising money at a one-to-one valuation for House Hack, which we think is an incredible steal. If you're an accredited investor, you can invest now and you get some additional warrants and if you're not accredited, stay tuned.

But we're very excited. We'll have a full projection set when we launch the Reggae, so you'll actually be able to see the projections that we're looking at. We didn't do projections with the first offering uh, for accredited investors, but but now we've We've nailed down some projections and they're very, very exciting. So I Can't wait to share more insight on that.

So that gives you a little bit of an update there on House Hack and my thoughts on the housing market.