Kevin here we've got a big update from mr schiller himself and a housing warning that he gives we're going to talk about my projections in terms of what's going to happen with the real estate market. But we're also going to look for some cracks that are starting to pop up. I've got some big charts here that are showing some concerning signs and they're leading indicators that you want to pay attention to. I'll.

Also give you some guidance in terms of where to look for leading indicators and what are lagging indicators. But first let me give you a heads up as to what mr schiller is saying right after i mentioned that if you go to metkevin.com tasty deposit, two thousand dollars, you'll get two hundred dollars for free. That's ten percent for free! If you go to medkevin.com tasty deposit, two thousand dollars i'll leave it there for at least two months, hopefully you fall in love with the platform, but either way they will give you 200 totally for free kevin.com, tasty we've even got the tasty merch here somewhere. Today.

Oh yeah anyway, so let's talk about schiller's warming warning so first uh mr schiller mentions that because interest rates have moved up as much as they have and they've sent the signal to home buyers that uh oh interest rates are rising. He believes that we could see, and usually real estate takes a few months to really know what had happened so sometimes finding those leading indicators is hard, but he believes we're going to when we look back and we get all the data we're going to have seen An initial surge in home buyers - and this is really interesting - that we would see an initial surge in home buyers right after rates started, going up, which would really put us at seeing a surge in buyers, probably somewhere between february to april, and this surge that he Talks about is problematic because this surge comes in potentially pays peak pricing, but also feels justified in paying peak pricing, because the people before them paid the prices that they're paying the difference is the people before them bought homes at maybe 2.8 percent, for a 30-year fixed And now people are paying 5.6 paying as much as a half of a point to be able to secure that loan. That's half of a percent right of of your purchase price! It's a lot of money, it's expensive! So anyway, if we do have this initial surge of people rushing to try to buy homes, because they think that interest rates are going to go up to eight percent, which you might think hey, who actually thinks rates are going to eight percent? Well, if you look at the university of michigan consumer sentiment index, consumers believe that real estate mortgage rates will hit eight percent within the next couple of years, and so the shiller argument that we're going to see this surge over here in february to april is kind Of problematic, because we'll see rates actually go up to 5.6 percent, where we are now, but we don't actually see home prices come down yet, in other words, it's we're going to see this potential lag or this sort of bobbing in the market, and this is kind Of what the market had been doing, if we go over here, this is about 2020 over here we got our pandemic over here, so we'll write covet here we got this temporary little covet dip. That was really only for about four to eight weeks that we saw any kind of noticeable dip in real estate and then, of course, we've had this stimulus induced and zero percent fed funds rate induced inflation, uh driven real estate, home price, apprecia, appreciation surge boy.

That was a mouthful and we've kind of arrived to these crazy prices, where home prices are up, in some cases, 20 to 35 percent year over year, and so we're kind of here at 2022 and we're seeing this bobbing happening right now. We're seeing that happening now in the data, and so schiller makes this argument that this bobbing could actually be extended rather than immediately. Oh, no rates went up so quickly, rather than immediately seeing a drop. You see a little bit of this extended surge of buying because people think well may as well get in now at 5.6, before rates get to 8 percent.

Okay, interesting a problem, though mr schiller says, is uh that right now, folks really don't have the feeling that there could be a housing bubble. But soon he says the memory of a bubble and the memory of the bubble popping in 2008 will start coming back and potentially heavily weigh on the housing market leading prices to head down. Now we're going to talk about some leading indicators and why we might believe uh in the trajectory that we've got drawn here. We're going to talk about these.

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That's why the program's zero to millionaire, if you are confused about rental, renovations or property management, there's a program for that. As well so don't look for a get rich, quick, look for get rich for sure and historically that's been home ownership all right going back over here to mr schiller and kind of this projection over here me. I personally believe i want to separate myself from schiller here for a moment. I personally believe that schiller is right about this initial surge kind of propping up the market a little bit here, but why do i believe that we're going to see this decline here? Well, when you see interest rates, go from 2.8 to 5.6 percent, roughly a three percentage move.

We know that we're going to see a 30 decline in purchasing power. That's because for every 1, that rates go up. Purchasing power goes down 10. So that's easy right.

3 percentage point difference, 30, purchasing power, lowes conducted a survey and they believe, based on their research, that excess demand for homes is somewhere between 20 to 28. This means that purchasing power will probably kill all of the excess demand that we have for real estate. But what happens if inventory starts going up? That's when we actually start seeing prices go down, because that inventory could then provide more supply for us. We actually see prices drop.

Now, let's take a look to see if we start seeing or are starting to see any of those sort of changes, let's go ahead and go to the ipad over here and let's take a look at this first chart that i'm going to pull up right here. This is the percent of active listings with price drops, look at the black line. Folks, the black line right here is 2022 compared to all of the other years. We have just as interest rates started, going up shot to the highest amount of active listings with price drops pretty much at any point, with the exception of this tiny little bubble right over here, tiny little uh spot there, the exception of that point there we are At the highest levels of active listings with price drops that we have seen in 2019, 2021 and 2022 so far now i like to remove 2020 itself because it's a weird pandemic year.

It's not good for seeing kind of consistent real estate movements. So that's a big red flag and if you start getting into specific areas, you're starting to see new listings also creep up we're not seeing that at the national level. Yet this last chart here this is a national level and the fact that we're seeing active listings with price drops on all metro or within all metro areas. It's a big problem.

You zoom in though, to little city or individual cities, and you can learn a little bit more about what's happening in individual cities and start seeing inflection points there here. We're seeing housing inventory new listings in austin texas actually now surpass any point in 2021, 2019 or 2022. It's starting to happen. We're seeing more price drops we're seeing excess buyer demand, go away, we're seeing more properties get listed now we're not yet seeing that nationally.

So when you look at new listings nationally here we're not yet seeing that we're kind of in line with prior years, as you can see the black line right here in line. But if you know this, if this data - because it's a four week moving average that this data is set on, if this data in about another four weeks or so starts showing a little bit of an inflection point to the upside here, we're gon na have some Potential issues for the real estate market, so let's jump back over here to the white board and understand what we potentially have ahead of us. In my opinion, what we have ahead of us are, first of all, the understanding of leading indicators. We have to know that inventory drives what happens in real estate and interest rates.

These are the two big things that affect the market: we're starting to see the change we're starting to see inventory build up. We know rates have gone up so we're seeing these already. But if we want to look for statistics, we have to be very careful in using any of the fannie mae or national association of realtor numbers because they tend to be somewhat delayed. It's okay to look at them and understand them, but they don't tend to be good, leading indicators, they're more lagging indicators, they're, usually about two months behind which is not great.

For example, at the end of may we just got the march data and it's like oh yeah. No, that's not the kind of data. I want that's like way old right, two month old data, it's crazy, but that's the way they do it in real estate. It's nuts real estate moves a lot slower than the stock market.

You have to remember that so one leading indicator that you can look at is the home builder, the new home builder sales, so sales for new homes in may. The survey expectation was that we were going to have 748 000 new contracts signed for new homes. We only ended up getting 591 000, that is 21 below estimates, and it is 16 lower than the month prior, which is actually shocking for may well. That was actually april data released in may, but for for april, when we have the spring home buying surge.

Usually you would actually expect to either meet the survey or be greater than the month before that, but we were substantially lower than the month before that. So another red flag leading indicator here. So what does all of this mean? Well, in my opinion, what this means is you don't necessarily want to rush to sell real estate, because if you sell real estate you're going to immediately take somewhere between an eight to ten percent haircut on the price of the property plus taxes right, you got to Pay commissions commissions could be four to five percent, even if you sell the home yourself, so what maybe you'll save two percent. Well, that's why we got a range of eight to ten percent here, but either way you got.

Ta pay the other agent you got, ta pay escrow title fees of about one percent. You've got to set aside money for fixing up the property vacancy transition, moving moving a tenant, giving a tenant money to move out whatever it's a disaster. Homes cost money to sell and they take time to sell. So eight to ten percent is probably what you would suffer if you sold, but let's say you did sell and then you did pay the taxes because you thought you were going to have better opportunities either buying the dip in the stock market, which you could follow.

All my trades and the stocks and psychology of money group that's a link down below 50 off on that one as well, and you can see what i'm going to be doing with real estate in the program as well, because my goal is to ride the wave Down, i don't know how far we're going to go down with real estate prices, but if i had to guess i think this bottom is going to be somewhere between 10 to 15 percent. This is sort of my base case scenario. I do think there is a worst case scenario, though, that we end up 20 to 25 lower in home prices. Now, unfortunately, for renters, this isn't going to be much of a benefit for you, because, as home prices potentially come down, i actually expect rent prices to continue to go up because rent prices still haven't caught up to the incredible surge of home prices we've had.

So i expect to see some sort of softening in asset valuations, like real estate prices, rents still going up as more people decide to rent longer, there's a tighter supply of rental homes and individuals who sell their home potentially just go to rent. That's absolutely something that happens. So the inventory is coming we're already seeing that data, the demand is gone, the rates are higher, expectations are that rates are going to continue to go higher. I don't actually believe that rates were going to go to eight percent.

I think they'll probably stay between five and a half to six percent, so i think a lot of that removal of purchasing power has already happened but uh worst case scenario, i'm only looking at about 20 to 25 and i think that's that's a lower chance of Happening here, but the reason i don't think we'll see, a 2008 style crash is because, with substantially more qualified borrowers today than we ever had before, with the ability to repay - and if you understand dodd-frank and any of the regulations or how difficult it is even to Get to a mortgage if you've gone through a recent refinance or mortgage application. You know how difficult it is. I don't think we're gon na see this kind of disaster. I don't really foresee a foreclosure or repo crisis, with the exception of maybe the most recent buyers buying here if they lose their jobs.

At the same time as buying a peak, we could potentially see some of that, but not a lot in the backlogs. So what do we expect well 10 to 15 is more my base case scenario. It's also possible that real estate prices just kind of do the. What was thought was going to happen in 2006, though oh prices will just level off and we'll have zero percent home price gains for a couple years.

Sure that's entirely possible, but i'm looking to be shopping once we get the data that we're at the turning point. So i'm not buying now not buying the dip now looking for that turning point and then, as you know, make sure to go to that link down below for those programs on building your wealth, 50 off a coupon code, it's the largest one, we've ever had and Folks, we'll see in the next one thanks so much bye.