Everyone meet kevin here. Should you wait to buy real estate, since, obviously the market is crazy. We've got a whole list of december reasons. Why we're going to have a stock market sell-off that'll continue throughout september.

We believe that when interest rates go up, then obviously home prices must come down right because it's more expensive to own a property. So therefore, prices should come down well in order to determine whether or not you should wait to buy real estate. Let's watch this video and pay attention to two very important things. First, number one is current price action.

What is actually happening and what are the trends telling us about home prices and the second thing is the bond market. What is the bond market telling us about interest rates and specifically the trajectory of mortgage rates? The answers are in this video now before i go into those two things that actually matter, let me quickly tell you what does not matter foreclosures going up and evictions going up. These are old news bits of information that a lot of click-baity fear-mongering channels are trying to share about real estate, suggesting that the real estate market must be getting ready to come down soon, because, obviously, if foreclosures are going up and evictions are going up, we're basically 2008, all over again, but if you actually compare the data to prior to the pandemic, we are at substantially lower levels of foreclosures than we have ever seen before, but prior to the pandemic, certainly at least within the prior 10 years before the pandemic, and before the Great recession we're at substantially lower levels of evictions, and it makes sense that they've started taking up because you can actually have foreclosures and evictions again they're not banned across the united states anymore. Most people who are currently in mortgage forbearance as well that about 1.4 million households, first of all, if they even all put their properties on the market for sale and just dumped out of real estate, it might be like a 10 headwind, wouldn't be a big deal, But they're unlikely to do that because they probably don't have to they can take a loan modification or they could do a 40-year mortgage instead of a 30.

They could stay in their home or, quite frankly, even if they did sell they'd. Probably just look like a regular sale because they're way up on their home value, so mortgage forbearance, mortgage, foreclosure, foreclosures and evictions not really the catalyst that we want to be paying attention to. We do want to keep a little bit of an eye on homeowner debt. We're starting to see a little bit more use of cash out refinances than ever before, as people are taking money out of their properties to supplement their income or supplement their investing strategies elsewhere, and this can sometimes be a little bit of a red flag.

We don't like seeing debt levels go up, but so far we're nowhere near the levels of debt we've pretty much ever seen in the past. So household balance sheets are pretty strong, so we're going to go ahead and put on the shelf evictions and foreclosures. Don't do those don't matter as much we're going to put on the shelf people doing more cash out refinances than you than we've seen during the rest of the pandemic? The good news is, these are still qualified loans. The average credit score is well over 760 for loans being done right now and folks have the ability to repay so we're not seeing the typical run-up to any kind of mortgage crisis or meltdown, so we're gon na put those things aside.

Now, let's get to the actual meat of what actually matters and that's price action and what the bond market is telling us number one: let's go ahead and take a look at this first. What you're going to do is you're going to look for blue lines and gray lines. Okay right here: blue line represents 2019 home sales and gray line represents 2018 home sales, and what it represents is the year-over-year change in price. So, for example, right here, the median home sale in 2018 right around february 18th was 247 000, and you could see this go up from the beginning of the year to the summer to about 273 000 and then a summer, just like in 2019.

In a normal year, you get a peak around the end of may beginning of june, and you start seeing home prices come down until you get to about the very last bit of the year. The last four weeks of the year where in 2018 you were flat and in 2019 you saw a little bit of a tick up in home prices. In the last month now, kovid had screwed everything up our usual march to june selling. Season actually had this big hole right here.

This is divot, that's our coved lockdown divot and that ended up leading home prices to continue going up for the rest of the year. Rather than seeing that typical seasonal slowdown so ignore the red line, because it's coveted and it's messy let's instead look at 2021 home prices did their usual january somewhat slow down here. Home prices then started taking off in february. They took all the way off until about guess what the first week of may and first week of june, very very predictable real estate prices capped out at about a median home price nationally of 359 000.

What happened then? Well, we didn't have covet again sure we always have little concerns about covent now, but we didn't have big, coveted lockdowns again, so we saw our typical seasonal slowdown in real estate prices. Real estate prices fell from about 359 to about 350 000.. That's about a two and a half to three percent drop. Now this was seasonally expected.

We were expecting to see that kind of slowdown, but what we were not expecting was to see prices start going up in the middle of september. Look at that bucked trend. We net, we don't see that in 2018 or 19, but we see it here. In 2021, 2021 home prices went up from their low of 350 back to 360 and they're still trending up right now.

This is very interesting because it means that homes are actually getting more expensive, they're, not getting cheaper. When you couple this with the fact that we're not seeing an eviction crisis, we're not seeing a foreclosure crisis, we're not seeing a forbearance crisis and yeah people are taking out a little bit more debt, but we're still not seeing excessive levels of debt. We're seeing ridiculously high levels of homework or equity we're not really potentially setting up for any kind of real estate crash or downturn in real estate prices, with the exception of rates, interest rates are the largest potential risk to the real estate market. That's because every one percent that you have home prices or sorry interest rates go up.

You usually see home prices fall about 10. That's because home purchasing power gets eradicated by about 10 for every 1 interest rates go up. This is now leading individuals to say. Well, wait a minute.

Jerome powell is expecting to finish his taper three months earlier than expected, he's expecting to raise rates potentially as soon as march or april, to combat inflation. If he raises the federal funds rate, isn't that going to push up mortgage interest rates? Because if rates go up, that means rates go up right, not necessarily so mortgage rates tend to closely follow something known as the 10 year treasury yield the 10 year treasury yield. Not the 30 year, ironically, they tend to follow the 10 year and what we're going to do right now is we're going to look at some of the bond charts to try to understand what the heck is going on. So the first thing that i'm going to show you is i'm going to show you a chart of the two year treasury yield.

This is a short term bond and you can see here in october november, as anxiety has mounted over jerome powell, potentially raising interest rates. You could see that the two-year treasury yield has gone from somewhere around 0.22 in september, all the way up to uh more than double of 0.55 on the two-year interest rate, but we usually don't see real estate denominated by the two-year. Instead, we see real estate denominated by the 10-year, even though we're talking 30-year mortgages 30-year mortgages tend to follow the pattern of what the 10-year treasury market is doing. They're, not necessarily exactly correlated, but they tend to look correlated.

Take a look at this folks as jerome powell's statements over this last week have scared the stock market. 10-Year treasury yields have actually fallen. We've fallen from about a high of about 1.68 to 1.4. Today this means we should see mortgage interest rates actually starting to trend down, and if we do a chart of mortgage rates 30 years - and we just do a very quick google, so that way you just like me - can find a non-biased source.

We run over to something easy, like google. Take a look at this look at the end here after jerome powell's rug poll essentially of the stock market, suggesting that hey we're going to end the taper sooner and we might actually end up leading interest rates to go up sooner. We've actually seen 30-year fixed-rate mortgage rates come down, so this actually means that as jerome powell is getting more hawkish, interest rates on mortgages are actually going down now. What's really weird about this is jerome powell is suggesting we're going to print less money, we're going to buy less bonds.

Well wait a minute. If jerome powell prints less bonds, then that means there's less pressure on bonds, which means the prices of bonds fall, which means yields should go up, which means interest rates should go up, so interest rates should be going up because jerome powell is not wanting to print As much money to buy as many bonds, but mortgage rates are actually going down, why is this happening and what does it mean for real estate? Well, here's my belief. My belief is that you are seeing shorter term debt, like two-year treasury yields, go up because over the next two years, we're going to be combating higher levels of inflation. However, you're seeing longer-term debt like mortgages or 10-year treasury yields go down because once we combat inflation over the next two years, we won't have an inflation problem anymore.

In the future, we might actually have more of a deflation problem and boom rates in the long term. Go down, which means mortgage rates could actually go down, which means, if you're waiting to buy real estate, you might actually end up paying more for real estate in the future than you would today. How freaking crazy is that, and if this whole video was a little over your head or under your knees, you better make sure you invest in yourself a couple hundred bucks a few hundred bucks. It's not that much check out the programs on building your wealth link down below use the cyber monday code, there's one that expires this friday for cyber monday week and you'll learn a whole lot about investing in real estate stocks.

The psychology of money and everything that i know about money and in total summation it's worth noting that, while short-term yields look like they're going to go up because of jerome powell's actions, longer-term yields are going down, which means the longer-term trend for 30-year fixed-rate mortgages should Actually be down not up crazy world, we live in check out those programs linked down below. Thank you so much for watching and folks, we'll see in the next one goodbye.