Welcome back to another meet! Kevin Report today we are on episode 29. it is February 20th. Kind of wild to think how what 2023 is already flying by us. Uh, today.

we're definitely going to be talking about the soft Landing fed. We'll also talk real estate. It's got a reaction video today on real estate so a lot a lot to talk about. Markets obviously closed today.

this is and uh, coming at the same time as Joe Biden Apparently made a surprise visit to Kiev to visit uh Zielinski. That was a pretty impressive and unexpected. It's kind of. to me it really feels like uh, the the investor of a startup is kind of going for the photo op with the startup CEO and it's kind of like we're here sending you money how y'all doing over here But it kind of sends the legitimacy that even after investing, they still want to be associated with this company right? Uh, and uh.

Oftentimes with startups you'll see uh, well I mean most startups don't do very well. You should know that as an investor. uh, and uh, a lot of startups. you know they end up getting investments from their uh from their VCS or whatever and if they do poorly, the VCS just don't show up anymore for a photo op or or want to be involved anymore.

It's kind of like lost money on that. don't want to hear anybody about that anymore. So Biden actually going to Ukraine is a little bit of a signal of sort of that reaffirmation of uh of the intent to continue to support Ukraine which which really is exactly what we've been hearing from now. More calls of Ukraine potentially joining NATO or the EU, both of which which might likely happen you've seen, especially Mr Sunac over in the UK be particular, particularly uh, vocal about this, and it really suggests that this Russia Ukraine disaster is probably going to continue Unfortunately, a lot longer than any of us expect, but so might the inflationary problems that we Face everything just seems to last a lot longer.

Uh, in uh, in this sort of world that we're in. but uh, you know I think as long as there's a patience and a trend towards certain things that are improving, then maybe that's not necessarily a bad thing. That, particularly in reference to inflation with Ukraine, it just doesn't feel like there's terribly much, uh, progress. but uh, in fact, on some accounts, uh, well, I always want to get too detailed into it.

Maybe we'll talk about more about it tomorrow, but but there are a lot of uh and I. Don't know if it's just for for the views or the attention it gets, but there are just as many articles now about uh Ukraine potentially losing as there are of articles about how well Ukraine is doing and and uh, how much they're winning so we'll see. But uh Biden visiting is certainly a a big old uh statement of uh, strength and recognition for Ukraine so that certainly is uh, it should be a morale boost to those in Ukraine Uh, to everyone else that uh I think does seem impressive to see the the President go there. Uh, anyway.

so um, obviously we hope that uh conflict um ends soon and the sooner it ends the better. but uh, it doesn't seem like there's any likelihood of that any time, uh, remotely in the future here. I Wouldn't be surprised if we end up continuing to see This Disaster throughout the next year here. although hey, maybe the Chinese can broker a deal Now that's actually kind of an interesting idea.

Uh, that? uh, that apparently the Chinese have a peace deal to present on the 24th of February that would be the one year anniversary for the War uh in Ukraine and that would be really interesting to see if the Chinese could actually pull off anything. I I Don't know how the United States would would take that given the tensions between the United States and uh and China recently, especially with China suggesting suggesting the potential of supplying lethal weapons to Russia to help them, uh, in their fight against Ukraine So it'll be fascinating to see what kind of peace deal there is. especially after the chips Warfare potential uh, theft at Asml by a Chinese individual, the whole weather Supply balloon debacle. Obviously, the tensions of with China that have just really gotten even worse since the days of the Trump Administration Who knows, but uh, can't wait for that to end so we'll see uh, what happens.

But again, things to pay attention to here with Ukraine uh, something that I like doing on days the market is closed as well as I like taking a peek just to see how Bitcoin is performing. and if we take a look at uh, we generally I'll go to the hour chart for Bitcoin Uh, we could see since the Market's closed, we've been relatively stable and this is sort of a theme that we're seeing. uh, when in markets right now, is that it we? We continue to sort of rise up off lower levels, and while there's volatility, we seem to be trying to create this stability of an upward Trend And so I'm really watching Bitcoin to see if that upward Trend continues because I believe that upward Trend continuing is a signal of potentially more interest in allocating more heavily towards risk assets, whether those are growth stocks or a core crypto. really.

Uh, and so we'll see. But here's another area where where we're seeing almost what I would call this sort of acceptance of okay, we're going through hard times for longer. so seeing that not just in Risk stocks, but seeing that also in Bitcoin and crypto assets and and I think the world is kind of getting used to this idea of okay, we're going to be going through turmoil for longer, so that's almost what I would call it turmoil for a longer. Whether it's a Ukraine or risk assets and inflation, it's uh, in my opinion, a little bit of a maybe, who knows.

Some would say sort of a misleading way to look at it because potentially you're you're sort of putting the blinders on to the real uh, dangers ahead. We'll look at some reports that suggest that, and others say it's just a natural process of markets adapting to the world that we're in and in the longer term being interested in making the best investments for that sort of environment. And so that's why I Think we've had this sort of reallocation to stocks. uh, and certainly, uh, things that have sold off quite well.

Uh, since the end of the year? I Mean if you look at the NASDAQ you're almost perfectly aligning uh, the the the near bottom. Uh, they said we could almost call it the bottom. Uh, with the with the end of the year at a rally essentially beginning at the beginning of the year. Now, we've had plenty of these before and you can go to March of 2020.

We had a rally about the similar duration as now you can go to July and August and see a similar rally as we've seen now. Uh, so it's entirely possible that we just end up reverting right back to this downtrend. Uh, get back under the 200-day moving average and end up uh, liking lower. However, on a technical basis, we have broken the downtrend, which was the downtrend we first saw in December and January, then in April which came after the March rally, then in September which came after the August rally, and then slightly at the end of December which came after sort of some enthusiasm at the beginning of November.

All of these Uh rallies have essentially pulled us and kept us under the 200-day moving average. We couldn't break the 200-day moving average, and we've been under this long-term Trend However, we've just recently broken that, and so that leads technicians to at least argue that if we were to rotate back down, we have a good chance of either bouncing off of the longer term trend line or the 200-day moving average, both which would be relatively bullish as a support for markets. So again, we'll see. But uh, at least things look like we're getting into that mode where we're accepting that yes, we're going to deal with higher rates for longer.

the bond market is accepting that view. Yes, we're going to deal with a little bit more inflation for longer. Yes, we're going to deal with the Russia Ukraine crisis for a little bit longer, but maybe maybe we can actually get through it. Uh, without.

Uh, without a devastating recession. or potentially even just a a soft and relatively minor recession. At least we don't seem to have massive red flags right now that, uh, that that things are pointing to a substantially darker Direction Despite the fact that I think there are a lot of bears in the room that would, uh, love that. to be the case, not seeing the the glaring red flags though, we'll we'll talk and about some of their analogies in just a moment.

So uh, fundamentals versus technicals for long-term investment is clear. says: Carlos rotation down is good with me. so I can buy? yeah I think you'll have plenty of volatility? Uh, and that's relatively consistent with this thesis I've had for months now about the Nike Swoosh right? the Nike Swoosh recovery. Honestly, someone here writes honestly: I'm always hearing about recession and found it useless.

I'm not in America and not worried about recession I started to be proactive in preparing myself. Yeah, I think that's the best thing you could do Oscar is you prepare yourself in the best way you can. But and and difficult or challenging times, you do your best to double triple down, work harder, perfect your routines, become a more efficient person, and do whatever you can to make more money. So that way, uh, whatever opportunities present themselves, you're prepared uh, to uh to to build your wealth Will be interesting if liquidity enters, but doubt it likely sideways, as says Jordan a lot of institutional liquidity on the sidelines? Um, yeah.

all right now. Uh, what we've got to do is we're gonna go chat. Uh, we're going to react to a particular video. Uh, that uh uh, by uh, it's this channel called Reventure Consulting and Nick uh runs it.

We're gonna watch the video together and we're gonna react to it. Edfin is reporting oops, I don't want to blow up the volume there. Hold on one sec. All right.

So I'll provide my commentary on this in about 10 seconds and we'll go through this together. So that's actually a good video standby for Real Estate Talk Now We've got to react to a video on the housing crash coming. Is it possible the housing market is going to crash another 50 percent from where we are. Now what's happening in the housing market? Well, in this video, we're going to react to a Nick from Reventure Consulting who's got a video and I'd like to add commentary and insight on specifically, uh, some of the arguments that he makes because I've got some personal insight into exactly these markets and we'll see.

do I reiterate what Nick has to say or do I have a different opinion. Let's find out as I hit the play button. here we go: Redfin is reporting a massive collapse in investor home buying in America Specifically, they're reporting that investors are buying roughly half as many homes as they were a year ago, a 46 decline in investor home purchases in the fourth quarter of 2012.. All right, I'm gonna pause here quickly.

So Redfin Reporting 46 decline investor home purchases Uh, and uh Nick goes as far as saying hey, look, that's actually worse than what we had in 2006, which was a period of having substantially longer periods of fewer investor buys. Now that's important, because if we go back to 2006, it's important to remember how long it actually took for the housing market slow down. To really begin, the housing market really began slowing down in late 2005. that means you really had your real estate pricing Peak potentially as early as late 2005 in some markets.

Now What's crazy about that is, we didn't actually think we were in a housing crisis until 2000, probably late 2007, and of course, 2008. And then the housing market didn't actually bottom out until about November of 2011.. that's about a six year period of sliding down in home values. It's pretty remarkable.

Remarkable. Now, there are some arguments that because interest rates have skyrocketed from about 2.75 percent on a 30-year fixed rate mortgage all the way to where we sit. Now, at about 6.75 that is a four percentage Point increase in interest rates on a 30-year fix for someone with a 740 credit score, which actually aligns with a 40 decline in purchasing power. It's kind of remarkable to think that that kind of purchasing power to climb has happened over the span of just one year, when that same kind of decline likely happened over the course of three years between 2005 and 2008.

And it wasn't until that three-year decline happen that we actually spawned the foreclosure and short sale crisis which really started taking hold in 2008 9, 10, 11, and 12 of 12. We were kind of already coming out really bottom aligning with about November of 2011.. So that's to say that this sort of housing crunch that we're seeing right now Yes, it's more dramatic, but it's also been substantially sped up in my opinion. Now, there's no guarantee of this, but I Believe that because we've sped up the crash so much and it's led to this decline of not just investor purchasing so much, but also decline in real estate sales volumes so quickly, it's entirely possible that we could actually see the real estate market recover much faster than we're covered in the 2005 to 2008 era.

So what we're comparing to the last recession I Think it's very important to remember how quickly this housing crash is coming up and then consider what that could mean going forward. Now, Also, keep in mind that in this housing crash, we are not facing the type of low quality loan portfolio building that we saw in 2008 where you had dead people get loans, people getting negative two percent interest rate loans only to see them adjust six months later to seven percent interest rate loans and all of a sudden people couldn't afford their homes anymore. And since home values were declining, they couldn't refinance. You're not seeing as much of that right now, people.

In fact, you might be seeing a very limited amount of that right now. The average credit score of somebody then was around 670. Today it's around the 770 100 points higher. You're also required to show you have the ability to repay, and rather than being able to qualify on a negative two percent interest rate, you have to qualify on your highest interest rate that you'll have in the life of your loan.

We also have substantially stronger standards for appraisals now than we did in the past. or in the past, you could just call up your buddy to get a property appraised. Now you have a randomly assigned appraiser, and while there are still obviously inefficiencies in any Market things have gotten a lot more difficult and I would say they're on much stronger foundations today than they were in during the last recession. Now with that said, what's interesting that I'm noticing is I'm starting to notice a rise in what are called these three two one loans where basically sellers are buying down the home buyers interest rates for the first one, two, and then three years.

So in other words it's kind of I'm just going to oversimplify this. Imagine you go in with a today interest rates. there's let's say seven percent and a home by a home seller's like, all right, Well I'll buy you down to five percent for the first year, six percent for the second year at seven percent for the third year. And then it makes it feel like the home buyer is actually getting a five percent interest rate.

And what's interesting about that is if they are getting a five percent interest rate right now, they might have the expectation that they could just refinance in a year. Maybe back to a normal five percent thirty year fixed rate mortgage. That kind of stuff makes me nervous when people start going into deals suggesting that they're going to be able to refinance in the future. I Get very nervous because now you're speculating that you're going to be able to have a payment that you're comfortable with in the future.

Now the good news, and that's something that's different today than in 2008 is that today you actually have to qualify for that seven percent rate in three years, whereas back then you'd only have to qualify for that lower rate that teaser rate so to speak. But it's an eerie similarity to 2008 that I don't like seeing or hearing about. mostly because I also feel it's sort of supporting home buyers to say okay, well, if the seller's gonna give me a five percent rate for a year great, then I'll buy right. It's supporting this sort of misaligned pricing that we have in real estate because we still deserve a little bit more of a punch in the stomach for home prices to come down and that process has begun.

Now let's go ahead and continue to see what Nick here says, because so far we're only 15 seconds into his video and I've already had a lot to say. 22. even bigger than the drops that occurred in 06 before the last housing crash And these investors particularly the Big Wall Street investors are Running Scared from the U.S housing market right now. which is of course going to cause home prices to drop by more because these investors were what was supporting a lot of local housing markets in a Metro like Las Vegas But okay, let's just pause there in most areas.

throughout the United States Before the pandemic, investors for residential home purchases represented 15 to 20 percent of home buyers now in the pandemic, because home prices really started skyrocketing in the second. uh, probably the first half of 2021 is really when we saw the Run I Remember doing weekly Market updates on the housing market in April of 2020 and saying I don't think the Market's going to go down I think it's going to go up and I put my money where my mouth was I ended up buying eight properties in Southern California each worth over six hundred thousand dollars 600 to about a mill. Uh, I Bought eight properties in just 2020 because I saw the numbers were bottoming out I'm like I Gotta Buy which was great because in 2021, everything exploded I Mean home values went up somewhere around 20 30 percent in just a year. It was insane and unsustainable.

Part of that reason was you had investors making up. Instead of 15 to 20 percent of home buyers, you actually had investors ending up making up as much as 25 of the market. So yeah, on one hand it is true investors absolutely helped prop up the market. Now are they the sole reason the market is propped up? Of course, not most properties still sell to home buyers in a single family and that ratio is now actually turning back to home buyers.

Where now you're getting back to only maybe about 15 to 20 percent home buyers as uh or or being investors. and that's pretty typical and sort of this sort of uh in state of the economic cycle. All right, let's keep us according to Redfin There was a 67 decline in investor purchases in Vegas, a 67 percent decline in Phoenix, 63 in Atlanta, 62 percent in Charlotte and an interest. What's really incredible is Vegas and Phoenix were also the bubbly markets.

The most bubbly markets of 2008. They got hit the hardest Florida Also was considered one of the bubbly 2008 markets, but interestingly, Florida today actually seems to be much more resilient than the Phoenix or Vegas they look at home prices in Florida. You're actually starting to see some areas like West Palm Beach in Tampa start trying to rival prices where they were last year and potentially they might be able to avoid declines. That's not what you're seeing in Phoenix or Nevada I'll talk more about that shortly.

Interesting question is, why are these investors bailing on the housing market? And it's simple folks, they're running out of money. Data from Finsite shows that from the third quarter of 2020 to the second quarter of 2022, these Wall Street investors raised over 32 billion dollars in mortgage-backed Securities to go buy homes in the U.S housing market. But here's the problem now folks. over the last three quarters, you can see they haven't really been able to raise any money in the mortgage-backed security market.

And that, and this makes sense. There's a massive liquidity crunch happening in markets we do not have as much money. On one hand, because the stock market has fallen, the bond market has fallen, People who are Diversified whether they are institutions or retail individuals have lost money in markets last year. Unless you were essentially wholly positioned position, positioned short or cash, your equity in bonds or real estate has gone down, which gives you less money to take and diversify into real estate.

This is pretty typical that lack of funding is one of the big reasons why these Wall Street investors can't buy as many homes right now is because the capital is not available to do it. Make no mistake, this is great news for you as a regular home buyer out there. The Leverage is now swinging back into your favor in the U.S housing market and in many cities and this is also true. Look, the more prices go down, the more of an opportunity you have to buy lower now.

I Think there's still a lot of patience to be required here, especially because I'm of the belief that the rental market needs to fall first before housing to really hit its Bottom Now think about that for a moment. I Just visited. Uh, if this was actually my second time visiting the Phoenix Market uh, Gilbert East Mesa Market and I'll be exploring the rest of the market as well here in the near future. but this was my second time visiting the market in just the last about six weeks.

And what? I Noticed between my first time visiting Phoenix and my second time visiting the Phoenix area that East Mesa and Gilbert area is I Noticed a substantial increase in the number of four rent properties and the number of single-family homes with for rent concessions concessions like hey, first month free which is basically the same thing as reducing your annual rent for a property to get somebody in to get a property rented. and that is the starting indicator that rents are rolling over. We're not certainly not getting the rent growth anymore that we used to get, especially as much more new construction is being built, But on top of that, you also have the expectation that so much additional Rental Supply is likely to lead to rental price declines. The more you end up having rent price declines, the more uncertainty you create for investors, the more uncertainty you create for investors.

The less investors want to buy. And as we saw earlier in the video, when you have fewer investors buying, you have less demand and competition for homes which could drive home prices down. So it's not just interest rates going up that can actually drive home prices down. it's actually rents declining thanks to an explosion in new construction and the availability of rentals.

Whether that's short-term investors like Airbnb Investors realizing they can't make their Airbnbs work so they're renting out properties. It's flippers who realize they can't sell their properties anymore to profit, so they're resorting to renting them out. It's long-term homeowners who do not want to lose their baked in low interest rates. so they're renting out their properties or its institutions panicking to get properties rented.

I Actually think the real pain in real estate doesn't actually come until you see rents full now? I Think that actually creates a phenomenal opportunity for those who are preparing for that obviously. I have a real estate startup called House Hack and that's exactly what we're doing now: I have I have more of a bullish mindset on real estate than Nick does. But I think we're still in the early phases of that downtrend, especially since we haven't really seen rents roll over yet. and that is going to change the investing game.

We want to see where those rents settle that way. Then we can compare those rents to prices and markets and see what kind of caps and cash on cash returns are we actually looking at when we're investing in real estate? So in other words, more to go. Let's keep listening a little bit. These home buyers are gaining a much higher share of the home purchases.

However, everyone there's still a big problem in the U.S housing market. that's going to cause Price Devices to go down by more in 2023. And that's the fact that the regular home buyer you guys out there, you're not really buying many homes either right now because there is a mortgage collapse occurring right now now. I Thought this was a great chart that he ends up putting up.

It's a basically the mortgage application chart and it there's been this this fervor or this idea that hey, you know people are coming back to renting homes or rather, applying for home mortgages in January and you could see that sort of Pop uh in the data here on the right, but it's still a relatively terrible level. Uh, that's compared to 2010 and 11, which is really your bottom of the market over here. And even though you add a pop of applications in 2012 and 13, you still had low applications. Now, low applications does not necessarily mean low prices because keep in mind that you had over here in 2013 and 14, you actually had very, very large real estate price gains.

So this is where I'm going to moderate this and say Hey You know, just because we have fewer mortgage applications doesn't necessarily mean the housing market is going to fall. But it is interesting to see that inflection point from Insanity of everybody wanting to get into uh, real estate after the covet era uh, when when rates were really cut to zero. but then also you you see this this January sort of spike in data which we've seen in so many different data sets suggesting that oh well, maybe maybe home buyers are returning, right? So it's quite interesting. someone here asks uh, or says uh, rents didn't fall yet Exactly.

That's my point. That's like literally the point is is that you're seeing new rents start turning over potentially lower, but broadly in many markets, you're actually not seeing high or or lower rental comp like sold properties yet. I'm saying sold in quotes here because really, the rental property I consider rented properties rented right? Uh, but closed rental costs. So in many markets you're not really seeing the declines yet.

but you're seeing the backup of inventory and you're starting to see rental concessions. And Rental concessions are always very difficult to use when you're trying to evaluate the real estate market. Because think about it this way if you have properties that are renting for twenty four hundred dollars a month. but then in the memo it said by the way we gave them their first month free.

Well, that's really like renting the property up for 2200 a month. but that rent price decline doesn't actually show up in the data yet, which is kind of incredible now. I Personally think a lot of the data we're looking at is setting up for basically what I thought when I started my housing startup which was buy time would probably be Q3 to Q4 of 2023. so far I'm still targeting Q3 Q4 2024.

I haven't delayed that, but I'm very cognizant of what's happening I'm not going to get into Q3 and if there are still red flags that things are still rotating down, I'm obviously not going to pull the trigger and purchase in Q3 if there's still red flags. but so far I'm still of the belief that by Q3 Q4 we could potentially as long as inflation indicates that yeah, we're finally starting to see a turn of inflation. We might then more convincingly see a turn in the housing market where maybe this could be a shorter housing market downturn. But right now, the trends are much worse than they are positive.

So in other words, the market that we've been warning about for the last year and a half in a housing market is playing out. We're playing out the pain that you would expect to see in the housing market. Now, we've already seen in many markets, home prices down 15 20. This is when you look at for example: Austin Boise you're down 20 in some of these markets.

Uh, if Florida is really one of the few markets that's holding up, Uh, really, where you're still where you're only looking at maybe five to seven percent declines, but you're starting to see somewhat of an inflection point up. So you got to pay attention to Florida Some markets in Florida down nine percent. nowhere near the twenty percent you've seen in other areas, whether that's Phoenix, Arizona, or Boise or otherwise. Let's take a listen into this portion of Nick's video here, where he essentially charts previous peaks of the housing markets.

Years, These peaks in home prices represent the housing cycle, and we're coming out of a 16-year cycle from 06 to 2022, where we can now see prices have started to go down, and what this graph says is that prices will continue to go down for a long time. Typically, it's actually not what the graph says. Now, look at a full respect for for Nick. Uh, it's clearly an indication of inflection point.

And while I agree that the housing market is likely to still go down more before it recovers, it doesn't necessarily tell us how long that housing market has to go down and as painful as the 2006 Peak to crash seams, which implies that we might see a substantial decline. I Don't believe that we're in that same environment unless and this is the one thing that I think could really push us down longer is if we get institutional liquidations. I Think that's really what we're going to have to see because I think we're much more likely to see a rental collapse than a continuation of a very large housing value collapse. However, that rental collapse could pull down the housing market a little bit more as people demand a higher return on their invested.

Capital So let me explain that for a moment. As I said earlier in the video: if you have Airbnb landlords who aren't making it anymore on Airbnb turning around and resorting to long-term rentals, you have home owners with locked in interest rates resorting to long-term rentals. you have maybe eye buyers like the open doors or whatever who realize with the flippers who realize they're they were idiots for buying at the values they did and now they have to rent out their properties. In my opinion, you're much more likely to see a substantial real estate rental collapse as the next phase of this housing market turn.

Now again, don't get me wrong, housing values have already in some markets Fallen 20 percent now. I Think to get to that next leg lower, we need to go through that rental collapse. Everything however, is going to be really dependent on the Federal Reserve. The Federal Reserve is able to convincingly say that they have conquered inflation by let's say, May June July August and bond yields start falling on the 10-year treasure yield.

From about where we sit now, 3.8 to 3.9 percent down to under 2.75 What you're going to do is very quickly put a floor under the housing market, and that chart does not actually necessarily have to go down for very long because you could end up seeing home buyers back to interest rates in that four to five percent rate. And now you have home buyers who have substantially more cash than they've previously had. Remember someone who previously had two and a half to five thousand dollars in their bank account now sits with somewhere around 12.8 000 on their bank account? People are substantially more excess savings than they previously did. And even though the savings rate is lower today, people, the savings rate is lower because people have more and because people have more Once we get that strong inflection point to the downside in rates: I Wouldn't be surprised to see a floor set under the housing market that's very, very, uh, different from 2006.

Now remember, the most dangerous words in investing are: this time is different and it's entirely possible that maybe you have sort of this shorter double cycle right where the housing market moves down. Uh, then inflation comes down, then the FED Cuts rates or stabilizes rates and and bond market yields full to where all of a sudden mortgage rates fall and people come back into the housing market. But then all of a sudden inflation comes back and you sort of get a doubled it. That's entirely possible as well.

Certainly not my base case, but I Do believe, uh, that we're not looking at the kind of correction that we saw in 2006, which is really where you saw home values fall anywhere between 40 to 50 percent. Some condo markets were down as much as 55 in housing, and so consistent with what I've been saying for about the last year. I Think most markets are going to experience a 15 to 25 decline in pricing. Some markets might end up having another squeeze in there where you go up to about 30.

And of course some markets will end up being lower, maybe closer to 12, but on average probably between 15 to 25 is consistent with what we're seeing. uh, in the data. But again, that rental crush is something we really want to pay attention to and we're not quite sure yet how those new home starts are really going to affect the housing market going forward. That's probably one of the big things that I'm paying attention to as well is the fact that you have many more year-over-year multi-family housing starts right now.

As you do. single family housing starts. Single-family housing starts year over year down 20 percent, whereas multi-family housing starts are actually up nine percent. And that is another factor that could really weigh on the rental collapse for home values now.

Nick goes on and shows the affordability of various different areas within markets, and He suggests that the first to crash markets are those with lower affordability. and so far this is correct. with really the exception of Florida take a look at Florida on the right Florida also showing a very high level of home unaffordability. the more red areas here, however, Florida is really a market that so far is still seeing substantial, a substantially less building and substantially more buying than the other areas on the West Coast West Coast without a doubt is getting hit harder now.

Nick ends his video by talking about rental vacancy rates and the two areas that he's seeing rental vacancy rates Skyrocket are Las Vegas Nevada followed by Phoenix and I. Have to say both of those are markets that I've actually visited in person within the last week to look at real estate in as we're educating ourselves for our real estate housing startup and that's redundant real estate housing startup. we're housing startup Housestac.com Anyway, uh, what we're seeing is exactly that build up of rental inventory. And so my biggest concern for the housing market going forward isn't rates going up more? It's actually really rates stabilizing, which is all the paying you really need.

And then we're going to get year-over-year comparisons that start showing in the next few months. Uh oh, Home prices are falling or have fallen 20. And what kind of fear that potentially creates in the housing market? Right when all of a sudden people realize that year over year housing prices aren't actually Rising anymore, That could create fear. Here's your year-over-year Redfin Housing data And look, if we just stabilize at 347 for the National Housing data, we stabilize at 347.

Well, when we get out here to March and April What we'll get out to this this area over here being what is this, this is April Right Here here's March you get into April Well, April You're going to be comparing the 383 comps from a year ago. 347 divided by 383 is a decline of nine and a half percent. What's that going to do to people's psychology and buying? And at the peak, we'll be comparing 347 assuming no further declines to 389, which would represent about an 11 Decline And that's on a national basis right now if this rotates up and we actually catch up. Yeah, maybe you have a flat housing market, but it would really require home prices to start Rising again.

and I Don't believe that is likely if rates stay stable where they are. So rates staying stable where they are. home prices are potentially likely to stay stable where they are, once we get year over year. fear that sets in along with the rental value.

Crush In the second half of the year, you could potentially see real estate values leg lower, another five to ten percent for a total of potentially a nationwide 15 to 25 percent correction. That, in my opinion, then gets a floor set under it once 10-year treasury yields fall under three percent. Now, we're not sure when that's going to happen, so that is going to be predicated on the market, but it's one of the large signals that I'm looking for. So this summer I think will be demarcated by potentially the largest amount of fear for home buyers, but also the least amount of competition from investors as rental values fall.

Now the risky part about that, as an investor is you don't want to get into buying properties if you're not confident where those rental values are going to go. So that's something that I'm definitely paying attention to as a real estate investor myself. and I'm very anxious to see what happens. Although I am patient and I think this Market is really demarcated by a need for patients if I was a home buyer right now or an investor as sort of just broad advice.

As a real estate broker, I'm also a financial advisor, but this isn't personalized Financial advice for you because I don't know who you are, but it's sort of broad advice. I would be pausing right now I wouldn't necessarily be super anxious about buying right now, even if I saw something that I thought was a good deal based on recent comps or based on oh, I could rent it out for X I would be pausing because I still think some of that pain and Rental comps coming down is ahead of us and then that fear for home valuations is ahead of us show you So yeah, in some markets, was there a January boost in enthusiasm of course. But that's also very typical because there's usually the lowest supply of homes available in January and that supply of homes really starts right Rising throughout the year and the same is true for buyers. Most buyers aren't actively looking during the holiday season, so I wouldn't be surprised to see an increase over time over the next few months in active listings.

usually you get your your Peak somewhere between uh March and May. Now combine those three factors: number one: Peak availability in May Peak Fear from year over year comps in May and potentially still high rates combined with rental comps falling. May is the end of Q2 right there with June May June is going to be an interesting time for the real estate market, so I'd be marking my calendar for May June and it's not clear if May June is going to be the perfect time to buy or December will be the perfect time to buy but I think May June is going to be when you hit Peak Fear and what that does to prices and your ability to negotiate could be juicy enough to actually start diving in. and that's what we're looking at with my startup.

You can learn more about the startup at Househack.com we're raising from accredited investors now we've got a non-accredited round that probably is going to launch in April which happens to be perfectly right before May will probably close our funding round before we buy, uh, probably by May the end of May we'll close out and then we'll be in buying mode. So we're really, really excited. We've got some phenomenal plans for the housing startup. Anyway, Again, go to Healthstock.com to learn more.

This video is in the solicitation, but uh yeah. Wow! There's a lot going on in housing and I think it creates fun opportunities for everyone and ultimately everybody should be exploring getting into real estate investing. There's a reason I have a course link down below called the Zero to Million a real estate investing course. That's because I think the easiest way for people to become a millionaire is through real estate and the opportunities now are starting to look pretty juicy.

All right, let's see what kind of commentary y'all have here. Uh, let's see here: Savannah to Florida Savannah Georgia Growing fast yeah President's Day Without Presidents? Well, maybe maybe in Ukraine Yeah California Wildfires, earthquakes Texas tornadoes, hail storms, ice every state is something says Tom Baker yep I hear home builders are slacking off I'm not sure what you mean by that uh, if you mean potentially, uh, reading the data a little bit potentially uh, let's see here: California Florida Real estate is known as high like Vape King is saying that so are you like making a marijuana joke? Am I releasing a boxable video? Uh, probably in the next few days. but no, no for no further out than a week I Have to do some, uh, a little bit more work on it, but it's it's mostly done so. but uh, it'll be interesting Excited for non-accredited investors, they'll have a chance later this year.

Yeah, uh. again. prep for for April May Uh, just be aware we're We're probably going to do a short window on it because I I don't want to be raising Capital while we're investing because investor relations takes a lot of time and effort and we want to shift that labor from investor relations to acquiring. And so that makes us a more efficient company, right? It means we're not spending uh, money on having two large, essentially departments going when we can just focus on just acquiring, right? Uh, and then that way we have, uh, cross-trained people making becoming the most efficient from an operating leverage point of view.

Uh, so so you know I I Don't want to be a, you know, a company that's that's raising money for in perpetuity and it's also not necessary. Uh, once we, uh, once we hit a Target which should be relatively easily achievable. uh, we we should be pretty self-sustainable Uh, especially with the cash flow projections that we'll be releasing in in April as well. So pretty excited.

Pretty excited. Uh, ever consider renting a Sprinter van on outdoorsy? Never on outdoorsy. but I've definitely rented Sprinter vans I Love Sprinter Vans This hoodie. This is a bread Bros But Bread Bread Bros I Call them Bread Bros Bread Boys hoodie.

You can find it on their YouTube channel. it's another YouTuber mm-hmm Yeah. So regarding International look most of what you I would say 90 to 95 of what you learned in the Zero to Millionaire course is applicable internationally and you just have to adjust a little bit for loans and taxes in your in your area. But that's it.

Like the principles are exactly the same. No matter where you go, you just have to become the expert. Um, all right. So let's now talk a little bit about markets and the Federal Reserve oh I Love talking about the Fed Yeah, Ah, all right, we gotta talk about Wage Disinformation standby.

All right here we go. Five seconds. oh boy, we got a lot to talk about regarding wage disinflation. Is it happening? How is it happening? Where is it happening? And are there red flags? Let me tell you up front, there are some red flags we've got to pay attention to.

We'll start with some of the good news, but you should stick around to the bad news because it's important to pay attention to not just the bullish news, but also the bad. So let's get into this new report out from: Goldman Sachs before I Get out, get into this report from Goldman Sachs So I want to quickly remind you about what I've been saying over the last about three months during the beginning of this earnings cycle which is Starbucks Chipotle much easier time finding it much easier to hire folks, less labor turnover and of course we've heard this before. Lyft and Uber massive new availability of workers like a 37 increase of lift leading to margins declining actually 37 increase of workers over at Uber. But basically Lyft complained about an extreme increase in the availability of workers.

This is a good thing, right? It puts less pressure on wages, which we we know that. So going into this I just want to remind you of what I've been talking about already and seeing for the last months here. but now we got to look at: Goldman Sachs Do they reiterate my findings and what red flags do they give us? So take a look at this so outlook on wages and potential wage disinflation. Take a look at this.

So right here. Significant Improvement in labor availability References In Russell 3000 Earnings calls So three thousand Uh companies in earnings calls references to quote labor shortages or various different quotes of that have fallen to the lowest level of the pandemic recovery. So, post Pandemic, we're at the lowest level of references to shortages, sitting at just 4.9 percent in Q4 earnings calls compared to 16.5 in Q3 2021. Our more detailed review of the Dow and large cap consumer company transcripts was even more encouraging.

Two-thirds of companies references two-thirds of references pointed to increased labor availability, and no companies cited labor shortages worsening. Furthermore, several companies viewed the Staffing situation as back to normal, including Starbucks in Hilton Hey, look, Starbucks was one that I was talking about for a while. Man, Okay, great. So where's the red flag Because so far that sounds good, right? We'll talk about exactly that.

Let's keep going here. Out of 44 of these calls discussing wage pressures in Q4, a third of them cited uh, or expected a sequential moderation. So this is one of the red flags. A third of them.

Basically, only 33 percent of them were like yeah, now we think wages are going to moderate right now. That's different than than when we hear this sort of bullish attitude at first because the bullish attitude at first is yay No wage price spiral which reduces the risk of the draw of the Federal Reserve and Jerome Powell needing to rug pull markets and force the recession to prevent a 1970s style of runaway inflation. And then we end up getting Paul Volcker, right? We do not want that. The good news is, we are not seeing that indication.

No indication of a wage price spiral at all. It's what I've been talking about for months. It's what's good what? Goldman is reiterating here. However, only a third of companies are actually expecting wages to potentially moderate, which would be stay flat or potentially decline.

That means most companies are actually still. That's 67 percent of companies are still experiencing wage pressures, but maybe not labor shortages. That means you're hiring more people, you're getting more availability, but you are employing people at higher prices than you did. Maybe pre-pandemic right? For example, The Wall Street Journal Had a podcast this morning.

It was about a 20-minute long podcast and the bottom line of it was, hey, companies and retailers and food service providers are finding it easier to hire people. But instead of paying, say, eleven dollars an average, uh, per worker 11 an hour, they're paying 15. So they're finding the workers. But they're still paying more, right? And this is where Goldman Sachs says wage pressures are easing and labor shortages have eased significantly further.

And they're not particularly worried about a pullback in earnings or earnings expectations, and which is good for potentially avoiding a recession. However, what's the big red flag? Well, the big red flag? At least one of them there are multiple. One of them is that wage pressures are easing, but will likely linger throughout 2023.. that's because markets are still adjusting to the fact that, yeah, we are living under an environment of substantially higher wages, right? So everything's still kind of adjusting up.

Yeah, it's easier to get Workers It's just easier to get workers at these higher prices, right? It's like, all right, great. you're not paying 11 bucks an hour anymore. you're paying now Hefty prices. So what other warnings do we get? Well, labor shortages waning, which is great.

Uh, the breadth of Labor shortages on the basis that they've analyzed analyzed here has retraced 75 five percent of the increase from 2019. That's a fantastic chart. You can see that depicted here, but basically the chart runs up to a level of labor shortages of 16.5 percent. Pre-pandemic labor shortage references were really sitting at closer to about two percent, and now we're sitting at four point nine percent.

So on a Fibonacci sort of retracement, you're down 75 on uh, mentions of Labor shortages. Great, but you're still paying higher wages. What do you have over here? In terms of commentary: Hilton Talks about the labor market situation has eased a lot. The health care uh HCA Healthcare says we're starting to see more favorable Trends in our recruitment function.

Yum brands. We're seeing stores staffed appropriately, so this is good, right? because it shows you no wage price spiral, Because it means look, we're able to hire people, but still, you're hiring people at a higher wage. Uh, you've got across Healthcare Frankly, there there are still issues in terms of the labor market. Things are a little bit better.

says: Laboratory Corporation So you're still seeing some Embers maybe of shortages. That's normal, right? We're not back at normal mentions of Labor shortage, just stop 4.9 but it's or 4.6 But it's a huge inflection to bullishness, right? Which is great. And it shows the waning of the wage price spiral. the wage price spiral by the way, just to show you how important it is, it was the one reason I sold my stocks in January of 2022..

I said we hit a wage price spiral which it seems like we're running into a wage price spiral which what I sold was probably somewhere right around over here. in this environment of like Peak mentions of Labor shortages Which what happened that ended up feeding through the economy for the most pain about six months later, right when you got to about June of 2022. Uh, that in October of 2022. Over here on the chart, those were roughly around the times you had the worst sets of inflation Inflation fears, wage price spiral fears.

So this is this was really a leading indicator of the pain that was coming to the market, right? You had insane inflation fears that turned into not inflation fears later. Now that's actually really incredible. If you think about this as a leading indicator, it's a leading tool that's telling you. As long as this keeps going down in six months from now, you should see even less wage pressure, more relaxation.

This is why I'm back to like essentially fully invested, not yoloing margin, but like these leading indicators to me are like grabbing me by the shoulders and screaming going. The opposite of the conditions that you saw in January of 2022 are what you're seeing now, which reiterates the lack of that wage price spiral fear which is very, very important. So this is a fantastic, fantastic, leading indicator. Keep in mind still, Embers of inflation.

Remember I've talked about this many times: 3M Johnson and Johnson Procter Gamble What do they say? Still expecting price increases to feed through the economy until about the second half of the year. So that means until June you're still seeing those Embers of inflation. Which is kind of probably why we're seeing some hot reports here in January in part at least, but the expectation is those will be gone by the second half of the year. That's what companies are saying.

and I think what companies are saying is very important Starbucks Talking about no labor issues minimal impact from labor from Hershey Company here. Great fantastic. What do we have over here Accordingly, the absence of progress in the other two-thirds of earnings calls on wages going down arguably implies continued upward pressure on real wages. This is right.

just because you are seeing a lack of shortages, doesn't mean the Embers of inflation aren't still there like people are available at higher prices. And this is a warning from Goldman Sachs where they say this could create second round effects of higher inflation in the short term. And yes, this is consistent with the volatility that I expect. This is why I Talk about the Nike Swoosh recovery that's going to be very volatile Trend up but very volatile I Believe the second round of Stop It Siri I Believe the second round effects are going to be that feeling of ah, still seeing some stickiness.

Still some stickiness, right? But the good news is the leading indicators are suggesting that as we get through those Embers they're waning. We just want to make sure those continue to wane. And as this Goldman Sachs report analyzes here and quotes Staffing firm Manpower group we expect wage inflation quote to continue to come down, but it's going to take a while. in other words, slower recovery, but it's going in the right direction which is great.

Here are some talks about wage pressures not going away, so some of the worst ones over here: Industrials This aligns with what we heard again: Jay Um, Johnson and Johnson 3M Uh, Procter and Gamble Here's Mohawk Industries which is a home furnishings company. We see inflation impacting our labor costs around the world. As we start raising labor rates, they're playing catch-up to higher wages. So again, people are available, but you're still paying them more, right? Manpower Group: We expect wage inflation to come down, but it's going to take a while.

Chipotle Sees labor costs improving. We've talked about that as well before this report came out. Hey, maybe They're copying me I'm just kidding I'm trying to Pat myself on the back, but I don't actually believe that. I'm sure they're doing just similar research which is great.

A Marriott International The wage pressures have moderated and we're seeing a more normalized environment. great. Mondelez There's a lot of talk about diminishing cost inflation. We don't see that at the moment, and it's driven largely by energy, ingredients and labor.

On the labor side of things, A Pulte group says their cost site is still elevated labored energy inflation by Procter and Gamble McDonald's says labor utilities will affect operating margin. Walgreens says the same problem and this is where I think a lot of those consumer staple companies are just going to take it in the margin which is another thing I've consistently been talking about on the channel. here. People like to say I flip-flop a lot which is fine because I do change my mind a lot but I tend to be very consistent when I have an investing thesis and have been very consistent about this investing thesis and and I'm looking for reasons to say: Hey Kevin where where are you wrong? And so far the only thing I could find is Mike Wilson telling us that we're we're too high on Mount Everest and we're in the danger zone where our oxygen levels are going down to the point where we're turning delusional.

Uh, which? The fact that he has to come up with that kind of analogy suggests that he's kind of starting to lack some data to support his argument. But we'll see. Uh, we'll see. You know, time will tell.

uh. anyway. Goldman Sachs here. Predicting uh, that the unemployment rate will actually stay pretty stable throughout most of the Year Here, they don't actually see the unemployment rate Rising above 3.6 throughout the entire year.

Uh, 10-year treasury note: Here's a note for Real Estate Right. Really expected to say in potentially the low four percent range the entire year up from where it is now around 3 9 which is another red flag for Real Estate. But you know we talk about those red flags for Real Estate pretty regularly. So this is some important things to pay attention to.

But when it comes to wages I think Goldman Sachs is right to say that things are looking good and the fear about the wage price spiral is going away. That's probably the most important tool that we have to suggest. Maybe that big old second wave of a market crash is it coming? and we could actually hold on to those moving averages that we've broken on like the QQQ or other stocks where we've talked about previously. We finally broke the trend of lower highs breaking that Trend and breaking above the 200-day moving average I Think is happening because the realization is setting in the market that yes, things are going to take longer.

it's going to be a slow and hard recovery, but we're not trending towards a wage price spiral to where we have to get Paul Volckert. So this is a fantastically bullish report from Goldman Sachs It is not one that says let's all go YOLO and margin and go crazy and then everything's going to be great tomorrow. But I think it is a very clear indication uh, that that we are seeing, uh, disinflationary effects in the wage Market Uh, someone named MK here says shrinkflation is rigging CPI Actually CPI already adjusts for shrinkflation. They adjust per quantity of good, so shrinkflation is is clearly adjusted for in.

um, in CPI. Uh, it looks like now you're spamming it. Why don't you address the shrinkflation that's trending on Twitter You know? Look, I'm a big fan of using Twitter But yeah, I go one extra level deeper. Okay, do a little research into how CPI is calculated and you'll see who CPI does address that.

The idea is to to look at a similar basket of goods over each reporting period and adjust for quantity of that. good. Which course is the best to buy? Well, I appreciate you asking that question. I Think you really want to start right now in the market that we're in with the zero to millionaire Real estate investing course.

However, a lot of people like the stock start with the Stocks and Psychology of Money group, so those are probably tied for most popular. And I think what a lot of people do is they just bundle those two together, which you get a special price if you bundle those two together. But uh, I think fastest way to to Big wealth. This real estate cycle you've got to take advantage of it.

Obviously, stocks and psychology money is opportune as well because we're I think we're in a fantastic time right now. So oh thanks John for saying Kevin is the best Finance YouTuber man I I can't say best but I appreciate I really appreciate you saying that. thank you for that. Uh, so shrinkflation is because it's cold outside.

damn it. Anyway, thank you for that. All right. So let's uh, let's see what else we have here.

Um, so yeah, we have. um, you know what I'd like to do is just briefly touch on uh Mike Wilson's piece on uh, the uh, the what's it called? uh, the bearishness for uh, the market. So let's get our the Bear report here. Um okay.

one sec here. All right. actually give me 10 seconds in order to start the bear report. There we go now.

I Gotta give the bear report and there are red flags in the bear report. personally. I would just want to be up front I Don't think they're as Salient as the Bears are making them out to be. but I Want to tell you what the Bears are saying because you know me.

I'm always looking for the Achilles heel and I think every investor and Company owner or startup founder has to look at their Achilles heels because if you're not, you're going to get blindsided. So it's important that we give some Credence to the Bears. even if we think they're Looney. you gotta respect them and you still have to be willing to go have a beer with the Bears and I'm willing to have a beer with anyone.

So let's get started. Nobody knows beer like I do anyway. So Morgan Stanley says in their opinion, it's good news that earnings estimates are finally moving in the right direction down and are reflecting the story of negative operating leverage and the sign that earnings forecasts are finally turning negative year over year. However, Morgan Stanley and their Bear report tells us that the bad news is the earnings estimates are well Off the Mark as if our forecasts were to be correct.

So Morgan Stanley is making the argument that folks listen to Michael Burry Michael Burry is right. That's what Morgan Stanley is saying. Morgan Stanley is shouting at you, screaming and saying earnings are going to come down and that is going to crush equities. And you should be prepared because the second half of the bear phase is the crushing of valuations because earnings are going down now.

Be very clear. the first is your multiple trading for 15x 18x, right? You get a multiple compression. You come down from 25 times earnings. To say, 15 times earnings.

That's a big Crush in terms of valuation. In fact, going from 15 to 20 represents basically a 40 decline the second half. In other words, the next 50 percent decline is when or like EPS goes down because then you're multiplying a smaller number by a smaller multiple and boom, you get your second half paying. So why does Morgan Stanley feel this way? Well, let's look at some of the sectors from here.

We're going to jump around the report a little bit and get to the best part. As noted last week: EPS Growth This quarter is negative for the first time since the coveted recession out of Quarter One estimates or uh, out Quarter One estimates. Oh, forward Quarter one estimates are falling at the fastest Pace since 2020 and forward EPS growth is now negative, confirming the earnings recession has arrived further. The decline in S P 500 margin estimates since the start of the year is the worst since the great Financial Crisis and more of a macro context.

We also highlight that the cross asset strategy Team So basically the people at Morgan Stanley uh argue that we have just entered the downturn phase, which is supportive of the notion that the macro backdrop is deteriorating. Bottom line: we don't advise waiting for the obvious signal. The Bear Market rally is over. We recommend positioning now in anticipation of the Moment of Truth before it's obvious and too late to move in any real size.

In short, timing is everything okay. This is like the most bearish report I've seen in a while and it like this is pretty bearish. They're basically telling you like shit's about to hit the fan. you better start shorting the market and part of me feels like they're kind of like the frustrated Bears who just haven't figured out their identity yet and they're like damn it We got caught offside so terribly in January the market has to go down more and they throw up charts like the following: see they They say the hope for a pet fed pivot is dwindling and fundamentals are deteriorating.

They seem to totally ignore that consumers have 12.8 thousand dollars of excess savings built up compared to the usual two and a half to five thousand dollars. They seem to completely ignore that analysis from Bank of America And basically what they say we got to give Credence to it. Okay, what they say is look, the market rallied for a Fed pivot in June of 2022, then crashed it, hoped, it rallied for a Fed pivot in September and then crashed in like August and September and then crashed it rallied in December and hope or in November for hopes of a Fed pivot and then basically