Here are my thoughts about the next Real Estate Crash, the current state of the stock market and economy, along with 5 strategies that you could use to come out ahead profitable - Enjoy! Add me on Instagram: GPStephan
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How To Profit Through A Real Estate Drop:
1. Get a 30 year mortgage.
That’s because the 30-year interest rates are STILL the lowest they’ve ever been, in history - and when you consider that long term investment returns are often WAY higher than your mortgage interest rate… it starts making a lot of sense NOT to pay off your mortgage early and invest the difference, instead. Not to mention, inflation makes your mortgage EASIER to pay off with future dollars, so the longer you keep it, and the higher the inflation we see- the cheaper your loan becomes.
2. Always get a fixed interest rate.
By locking in your rate, you know with 100% certainty how much it’s going to cost for the next 30 years, and from that - you can plan accordingly.
3. Refinance your mortgage to save more money.
This allows you to get a brand new loan that replaces your existing loan - and in many situations, the new loan is going to be at a lower interest rate than you’re currently paying - THEREBY saving you a little bit more money, every single month.
4. Only buy a home you plan on keeping at LEAST 7-10 years.
The truth is, real estate values ONLY matter in the short term if you intend on selling - so, everything I’ve mentioned SO FAR is designed to make your monthly payments as low and predictable as possible, just so that you don’t NEED to sell. Ideally, by NOT selling - you’ll have the time to ride out any fluctuations in price LONG enough for them to eventually recover, and bring you back to profitability.
5. Focus on Cashflow First - Value Second
Rental prices tend to be completely immune and stable from real estate PRICE DROPS…so, even if the market VALUE goes down…most likely, rental prices should stay the same - or, slightly increase.
6. Only buy a home you can comfortably afford.
NEVER max out the loan you’re able to qualify for…NEVER extend yourself too far because the home is awesome…NEVER spend more than 35% of your income on your housing payments…and instead, get something that isn’t going to cost you more than you can reasonably pay, IF your income goes down. The reality is, the lower your payment is in relation to how much you make, the safer it is that you’ll be able to keep it through a downturn without running out of money, or having a difficult time staying afloat.
Real estate should IDEALLY be something you ONLY buy if you intend to hold on to it at LEAST 8-10 years, with a fixed rate mortgage, locked in 30 years, on a payment you can easily afford…and that way, even IF the entire market goes down…you’ll be able to get through it without ANY change to your day-to-day lifestyle.
My ENTIRE Camera and Recording Equipment:
https://www.amazon.com/shop/grahamstephan?listId=2TNWZ7RP1P1EB
For business or one-on-one real estate investing/real estate agent consulting inquiries, you can reach me at GrahamStephanBusiness @gmail.com
*Some of the links and other products that appear on this video are from companies which Graham Stephan will earn an affiliate commission or referral bonus. Graham Stephan is part of an affiliate network and receives compensation for sending traffic to partner sites. The content in this video is accurate as of the posting date. Some of the offers mentioned may no longer be available. This is not investment advice. Public Offer valid for U.S. residents 18+ and subject to account approval. There may be other fees associated with trading. See Public.com/disclosures/
GET YOUR FREE STOCK NOW WORTH UP TO $1000 ON PUBLIC & SEE MY STOCK TRADES - USE CODE GRAHAM: http://www.public.com/graham
NEW BANKROLL COFFEE NOW FOR SALE: http://www.bankrollcoffee.com
DOWNLOAD MY NEW FINANCIAL APP: https://apps.apple.com/us/app/hungry-bull/id1563856658
THE NEW PODCAST: https://www.youtube.com/channel/UCMSYZVlQmyG8_2MkIKzg0kw
The YouTube Creator Academy:
Learn EXACTLY how to get your first 1000 subscribers on YouTube, rank videos on the front page of searches, grow your following, and turn that into another income source: https://the-real-estate-agent-academy.teachable.com/p/the-youtube-creator-academy/?product_id=1010756&coupon_code=100OFF - $100 OFF WITH CODE 100OFF
How To Profit Through A Real Estate Drop:
1. Get a 30 year mortgage.
That’s because the 30-year interest rates are STILL the lowest they’ve ever been, in history - and when you consider that long term investment returns are often WAY higher than your mortgage interest rate… it starts making a lot of sense NOT to pay off your mortgage early and invest the difference, instead. Not to mention, inflation makes your mortgage EASIER to pay off with future dollars, so the longer you keep it, and the higher the inflation we see- the cheaper your loan becomes.
2. Always get a fixed interest rate.
By locking in your rate, you know with 100% certainty how much it’s going to cost for the next 30 years, and from that - you can plan accordingly.
3. Refinance your mortgage to save more money.
This allows you to get a brand new loan that replaces your existing loan - and in many situations, the new loan is going to be at a lower interest rate than you’re currently paying - THEREBY saving you a little bit more money, every single month.
4. Only buy a home you plan on keeping at LEAST 7-10 years.
The truth is, real estate values ONLY matter in the short term if you intend on selling - so, everything I’ve mentioned SO FAR is designed to make your monthly payments as low and predictable as possible, just so that you don’t NEED to sell. Ideally, by NOT selling - you’ll have the time to ride out any fluctuations in price LONG enough for them to eventually recover, and bring you back to profitability.
5. Focus on Cashflow First - Value Second
Rental prices tend to be completely immune and stable from real estate PRICE DROPS…so, even if the market VALUE goes down…most likely, rental prices should stay the same - or, slightly increase.
6. Only buy a home you can comfortably afford.
NEVER max out the loan you’re able to qualify for…NEVER extend yourself too far because the home is awesome…NEVER spend more than 35% of your income on your housing payments…and instead, get something that isn’t going to cost you more than you can reasonably pay, IF your income goes down. The reality is, the lower your payment is in relation to how much you make, the safer it is that you’ll be able to keep it through a downturn without running out of money, or having a difficult time staying afloat.
Real estate should IDEALLY be something you ONLY buy if you intend to hold on to it at LEAST 8-10 years, with a fixed rate mortgage, locked in 30 years, on a payment you can easily afford…and that way, even IF the entire market goes down…you’ll be able to get through it without ANY change to your day-to-day lifestyle.
My ENTIRE Camera and Recording Equipment:
https://www.amazon.com/shop/grahamstephan?listId=2TNWZ7RP1P1EB
For business or one-on-one real estate investing/real estate agent consulting inquiries, you can reach me at GrahamStephanBusiness @gmail.com
*Some of the links and other products that appear on this video are from companies which Graham Stephan will earn an affiliate commission or referral bonus. Graham Stephan is part of an affiliate network and receives compensation for sending traffic to partner sites. The content in this video is accurate as of the posting date. Some of the offers mentioned may no longer be available. This is not investment advice. Public Offer valid for U.S. residents 18+ and subject to account approval. There may be other fees associated with trading. See Public.com/disclosures/
What's up you guys, it's graham here, so let's talk about something that i'm sure most of us have considered in some way or another, and that would be the next housing crash. After all, in the last month, housing prices have continued to hit record high at the record high inventories at its lowest level in history and across all metrics. A recent survey found that the overwhelming majority of americans now feel like it's a good time to sell a home, but a bad time to buy one with even the search term housing crash having just increased 100 to the highest level. It's ever been.
That's not exactly surprising either considering that interest rates are said to increase faster than we initially expected. The eviction ban was just postponed another 60 days and now, with foreclosures being allowed to move forward. There's certainly the concern that a wave of homes is going to hit the market as congress keeps kicking the can further and further down the road until eventually it's too late. But thankfully there are some things that you could do now ahead of time to make sure you're in the best position possible to come out ahead profitable.
So that way, no matter what happens, you're totally prepared to print tendes, but really quick before we dive into the current state of the real estate market. I want to say a huge thank you to the sponsor of today's video, the like button. Unfortunately, ninety percent of viewers leave that, like button unsmashed, and that is unacceptable for the low cost of just absolutely nothing. You could give the like button, the click it deserves and as a thank you for doing that and helping out the almighty youtube algorithm.
I will do my best to respond to as many of your comments as i possibly can. So. Thank you guys so much now with that said, let's begin all right so first in order to figure out how to best prepare for something like this, we should cover the severity of the real estate crashes that have happened in the past, because even though it's easy To think that the market is going to crash and i'm never going to be able to financially recover from this, the truth is with some preparation ahead of time. Losing money in the long term is actually fairly rare and, yes, i did just use an old meme.
I hope you enjoy it anyway. The first major real estate crash we got ta talk about is the great depression of 1929.. Now here's the thing most people know this is the infamous stock market collapse, where prices dropped 83 percent over 2.8 years, but because of the mechanics behind the crash, real estate was also significantly impacted as well. That's because, prior to 1929, the economy was booming.
Money was pouring out of every crevice banks lent money to anybody. You ask and people for a lack of a better word, just speculated on everything, because values kept going up. However, once the market showed even the slightest glimpse of a peak, people began selling out of everything and withdrawing their money from the banks for fear that the banks would be going out of business. But banks didn't have enough money on hand to give back to their customers all at the exact same time, so they began shutting down. That meant that afterwards, the banks left standing didn't have extra money to lend out. Assets were seen as too risky and because of that, real estate suffered and saw a 67 decline in price for nearly two decades. But thankfully, though, afterwards real estate didn't see a big decline until much later in the 1990s now prior to then, the real estate market saw a huge increase due to new lending options, a growing population, low interest rates and easing regulation. But the savings alone crisis caused interest rates to suddenly go up home construction dropped and housing prices remained fairly flat until 1997, which then leads us to the next real estate crash in 2009..
This was caused by too many people speculating on the value of real estate. Fueled by short-term, cheap, temporary adjustable-rate mortgages that allowed anyone to buy a home as long as they were able to make the introductory rate payments. However, a lot of those loans had what's called the balloon payment which caused the price to go up substantially after a few years, and that was a disaster. Evil began defaulting on their loans, inventory flooded, the market banks went out of business and the housing market fell.
33 throughout the us, with some harder hit markets declining more than 70. However, the interesting part with all of this is that, throughout the last 100 years, with the exception of both 1929 and 2009 for the most part, housing prices have been fairly resilient decade over a decade like after world war ii in the 1940s, housing prices and construction Boom due to a surge of demand, then during the 1970s stagflation era, real estate kept going up from an increase of inflation. Then during the 1980s recession real estate went up another four and a half percent. As inflation stayed high, the 1990s saw some markets drop, but the harvested areas didn't even decline.
10. The dot-com bubble had very little impact on real estate prices, as interest rates went down, but now with housing prices at the highest level, they've ever been with most americans. Thinking it's a bad time to buy a house. We have some different challenges today that will directly impact the real estate market and when it comes to some of these issues that might happen, there are five points to consider the first rising interest rates.
It's no surprise. This is one of the main reasons why real estate saw such a huge price increase to begin with, when the federal reserve lowered their benchmark interest rates, all the way down to zero percent in march of 2020, would-be homeowners took that as an opportunity to lock in A really cheap loan that would allow them to purchase even more house and therefore drive up the price. That's because home prices and interest rates are directly correlated and since the 1970s, the lower interest rates go. The faster home values increase, leaving us in a unique position where eventually interest rates might have to go back up now. Originally, this was planned to happen in late 2023, but now that inflation is rising faster than expected, some anticipate that a rate increase could happen as soon as 2022, meaning the cost of a mortgage could get more expensive and that would put downward pressure on housing prices. The second more inventory for sale now, here's the thing as the pandemic began to take shape. In march of last year, fewer properties were listed on the market for sale, realtors had a difficult time, showing properties and sellers preferred to take their home off the market and stay put rather than sell their home and put themselves at risk. But when you combine that with low interest rates and eager buyers willing to scoop up anything, they can just to lock in a loan that limited inventory pushed prices way higher than expected.
On top of that, construction was also delayed due to a shortage of building materials, supply chain issues and a scarcity of labor, which meant that, even if builders wanted to construct more homes, they couldn't which then led to prices moving even higher. But now that might soon start to change with inventory increasing for the first time in a year and as the economy slowly begins to open back up, more and more sellers might feel comfortable, finally, cashing out of their homes and adding more inventory on the market for Buyers to choose from the third buyer optimism is also declining. This was discovered by a survey conducted by fannie mae, which found that overall, 70 percent of americans felt, like it was a good time to sell and 64 said that it was a bad time to buy. That's said to indicate that buyers are reaching a tipping point from what they're willing to pay and homes could only get so expensive before.
Eventually, people are outpriced and are forced to wait on the sidelines for things to come back down. The fourth building materials are also coming down in price as well. Now this has been a really hot topic lately, because in the last year lumber prices have increased up to 400 percent, adding on roughly 36 000 to the cost of buying a new home. On top of that supply, chain issues and limited capacity also raise the cost of home insulation, plumbing fixtures, paint, stone and everything else it takes to build a house.
So what winds up happening is that that increased cost gets passed on to you as the customer, while home construction costs went up 18 just from that alone, but the good news is that lumber prices are finally falling down about 68, since the peak housing materials are Also falling in price, alongside with it, as americans, are spending more time outside and finally going on vacations instead of taking up home renovation projects and building. All of this is to say that the cost of building a home might soon start to come back down and, finally, fifth, we have the eventual end of both the eviction and foreclosure moratorium. These were the protections put in place during the beginning of the pandemic to prevent both tenants and homeowners from being displaced from their homes for tenants, this included a ban on evictions that was just recently extended through october and for homeowners they had the option to claim Mortgage forbearance and temporarily pause their payments for up to a year, but now, as both of those protections are beginning to come to an end, the concern has now shifted to what happens when they expire, and is that going to lead to more inventory on the market? From homeowners who need to sell? Well, that's not exactly clear, because, even though we have a list of reasons why real estate could go down, we have just as many reasons it could go back up. For example, first interest rates are still at historic lows and they could stay there for quite some time, even though some expect rates to rise as soon as 2022 jerome powell still maintains. That rates will stay near zero percent through 2023, meaning we could continue to see more demand for mortgages further, boosting up prices more than they are now. Second, even though more homes are coming on, the market, there's still a dramatic shortage of inventory in the us. In the big picture, inventory is down 43 since june of last year and nationally. The typical home is only in the market for 37 days, compared with 72 days.
During the same time, in 2020, and even though more inventory is coming in, the market, listing prices are still rising, which indicates there's still no shortage of buyers out there willing to pay whatever it takes to get a house. The third, even though building materials are also coming down in price, they still have a long ways to go. That's because supply chain shortages still have an impact on how much material can be produced and because of that economists say that demand for lumber is expected to hold up well for quite some time. Although supply should rebound and the price of lumber should sharply decline by the end of 2022 as lumber imports increase, fourth, we could continue to see more home buying demand from both millennials and gen z over the coming years.
Further boosting up prices like it was reported that this year, millennials have dominated the home buying market, but soon approaching is gen z and with 72 percent of them saying that they eventually want to buy a home. That could mean eventually even more buyers lining up to place offers and fifth, the risks of a new shutdown could potentially halt the recovery and limit the amount of new inventory coming on the market. That's because the longer our economy is restricted, the lower interest rates will stay, the less material can be produced, the less people want to move and the higher the prices will generally be, as we've seen throughout the last year, and all of this, of course, is just Speculation, but the reality is, we have no idea what's going to happen, and that means accurately predicting what's going to happen with the real estate market is next to impossible, but at least the good news is regardless of what happens whether the market goes up, or it Goes down, there are some things that you could do immediately to make sure you come out ahead profitable, and this is what you need to know. The first thing that i would recommend everybody do is get a 30-year mortgage. That's because the 30-year interest rates are still the lowest they've ever been in history, and when you consider that your long-term investment returns are going to be way higher than your mortgage interest rate, it starts making a lot of sense not to pay off your mortgage early And invest the difference instead, not to mention inflation, makes your mortgage easier to pay off with future dollars. So the longer you keep it and the higher inflation is the cheaper that loan becomes. The 30-year mortgage also gives you the major advantage of flexibility like there's. Nothing.
Stopping you from paying off a 30-year mortgage in 15 years, if that's your priority, just double up in your payments and voila, it's the same thing, but if something comes up you lose your job or you need to pay a little bit less a 30-year mortgage gives You the flexibility to make the minimum payment and save the difference instead of locking yourself into a higher payment. Upfront like with a 15-year mortgage. Second, always get a fixed interest rate right now, with rates so low, it makes sense to get a fixed payment every single month until your loan is paid off by locking in your rates, you'll know exactly what it's going to cost you every single month for the Next, 30 years, and from that, you could plan accordingly. That also prevents your payments from suddenly being increased five to seven years from now, if payments are higher in the future than they are today and if that were to happen, while the real estate market is down, not only is that going to cost you more money, But the market is falling alongside with it so go ahead and lock in your interest rate and then no matter what happens.
Your payment is guaranteed to stay the same, the third over on the topic of loans. You should refinance your mortgage to save more money. Now most likely, if you own a home already you've, probably either done this or at least considered it. But if you have the opportunity to refinance your house and save a little bit of money, i would go for it.
This allows you to get a brand new loan that replaces your existing loan and in many situations the new loan is going to be at a lower interest rate than what you're currently paying, thereby saving you more money every single month. Then fourth, one of the best ways to make it through a real estate crash is to only buy a home that you plan on keeping for at least seven to ten years. The truth is real estate values only matter in the short term. If you intend on selling so everything i've mentioned so far, is designed to keep your payments as low and predictable as possible to prevent you from needing to sell then, ideally by not selling you'll, have the time to ride through any fluctuations in price until eventually you're Back to profitability, then, fifth, if you're buying a property as an investment, you should focus on cash flow first value. Second, i know it sounds kind of counterintuitive, but when you invest in real estate, the value of the house doesn't make much of a difference. You just care instead about how much that property is making you every month, and the good news for something like this is that, usually, if real estate values are falling and fewer people are buying they're renting instead, which means you have more options for tenancy, not to Mention rental prices tend to be completely immune and stable from any real estate price drops. So, even if real estate values go down, the rental prices should stay the same or even increase, and six. The best piece of advice for anyone watching is to only buy a home that you could comfortably afford, never max out the loan that you're able to qualify for never extend yourself too far, because the house is awesome, never spend more than 35 of your income on Housing payments and instead get something that is not going to cost you more than what you could reasonably pay.
If your income goes down or you lose your job, the reality is the lower. Your payment is in relation to how much money you make the safer you're going to be to be able to keep it through a downturn without running out of money or without having a difficult time staying afloat. Real estate should ideally only be something you buy. If you plan on keeping it at least seven to ten years, with a fixed interest rate locked in for 30 years on a payment that you could reasonably afford and that way, even if the entire market goes to poop, you'll be able to get through it.
Just fine without any change to your day-to-day lifestyle. And lastly, let me just say this: there's no shortage of people out there wondering if it's a good time to buy a house or if they should wait for prices to come down, and my philosophy is who knows? There's really just as many reasonable arguments why the market should go down as there are that the market should get even more expensive. So as long as you could stick with those few points i just mentioned, take your time buy a house that you could afford and plan to hold on to it at least seven to ten years. The chance of you losing money. Long term is fairly slim and the difference between you buying now and later is going to be fairly nominal. I think it's way more important instead to focus on what you can control like maintaining your own finances, buying less than what you can afford, keeping a budget saving money and keep an emergency fund. I'm a firm believer that those habits will take you way further than perfectly trying to time the real estate market, along with, of course, smashing the like button for the youtube algorithm. So with that said, you guys thank you so much for watching.
I really appreciate it as always make sure to destroy the subscribe button, and the notification bell also feel free to add me on instagram, i posted pretty much daily. So if you want to be a part of it, there feel free to add me there. As on my second channel, the graham stefan show i'm posting there every single day - i'm not posting here. So if you want to see a brand new video from me every single day, make sure to add yourself to that.
And lastly, i got a really special announcement. Public is now going to be offering you a free stock that is worth all the way up to thousand dollars when you use the code, graham using the link down below in the description so feel free to get yourself a free stock. You could also follow me on there to see exactly what i am buying. Let me know what stock you get.
Thank you so much for watching and until next time.
My favorite videos man. Question Graham, I have some cash in the bank and want to put it out in the market. Is 2022 a good moment? What about putting money in Brazil? Any help? Thanks bro
The housing market and the economy in general in the U.S is fake. The federal bank will lower its interest rate when people don’t have money to buy homes , cars and other things. Low interest rate is a formula of a bubble in the long run. We actually not the same powerful country as we were 30-40 years ago.
China took all the jobs ( we gave it to them on a silver platter) and since then we became the consumer and not the manufacturer. That means that when you need to import most of your goods from overseas you have no power and you should buy what they sell you.
Greed is the name of the game here in the U.S the Feds lies to the people the banks will always make money and the little citizen will pay for all of it.
We are in a bigger bubble than we were in 2007.
I live in Northern VA, and I'm already seeing single family home inventories building up and selling at below Redfin recommendations. It's already starting to happen, finally.
Hopefully , most homeowner will short sale their homes . Foreclosure ruins your credit . Short sales can protect your credit .
Please change thumbnail this is a disrespect to everyone whose houses flooded during the storm Ida
tired of looking at that stupid sensationalist facial expression in your thumbnails…
@Graham Stephan Could you talk about Bay area real estate some time? Thanks
The sponsor of the video being the like button… I was anticipating it but hearing you actually say it made me have to like the vid
I'm a truss designer…. (Design roofs and floors) the housing market is terrifying to all of us
Wall Street is diving back into the business of turning home loans into bonds
Housing market is sinking.. another bubbles bursting soon .. Biden is looking bad gas prices up and everything else is going wrong with the world I pray he figures it out.. I pray everyone figures this out but this housing market leads to the downfall always there should of been regulators at guard to see this happening again but give them not even a huge pay out but a couple of dollars and they look the other way will the chess player’s laugh and cash those big checks they write themselves
Housing market is sinking.. another bubbles bursting soon .. Biden is looking bad gas prices up and everything else is going wrong with the world I pray he figures it out.. I pray everyone figures this out but this housing market leads to the downfall always there should of been regulators at guard to see this happening again but give them not even a huge pay out but a couple of dollars and they look the other way will the chess player’s laugh and cash those big checks they write themselves
I broke my iPad screen trying to smash the like button. You owe me a new iPad bruv 😉
Hi Grantham. Hello from HK. Have you ever think about owning a motel / inn? Do you know anything about starting one ?
I know how challenging accommodation can be at that stage, I had to deal rent and work to pay my college tuition and I still ended up with a large cloud of student loans hanging over my head. Thankfully I have been able to satisfy all my debts through earnings from my stock investments. pheww !!
Most of this advice is just common knowledge: get a 30 year, fixed rate mortgage; refinance to lower your rate; hold on to your property until its value returns; don't make payments that your Max budget. Nothing remarkable here. If you don't already know this – keep renting. You should not be looking to purchase real estate yet.
Don't worry communism is almost here, housing will be provided for you 🤷♂️
Screw the real estate business. I'm to corner the tent selling business.
I disagree but I love the content. Always great production and presentation
This video was very very helpful for me right now as a new buyer and really contemplating on whether to buy or to wait !! Thanks for sharing!!
I use youtube for music so hitting that like button causes you to go with my playlist of gansta rap LOL
My fiancé is about to deploy out of country, our dog and I will stay here, should he buy or rent a home for the dog and I?
I am a realtor in the Nashville area & looking forward to the next bubble pop….I have not been able to buy a flip in months. The crazy demand for homes here has driven the price of a floating turd up past a workable number for profitable flips. Looking forward to the future foreclosure boom.
Waiting on the UK to follow. Got my cash monies ready for the dip.
So enough about real estate Graham, I heard you can play a Dr. Dre song on the piano. . Gotta give em what they want and its gotta be bumpin' city of Compton. . .
Aw, darn. I thought your “really special announcement” was going to be that y’all are expecting!! 😅👶😜
Seriously, though, thank you for this (& all) of your videos! I especially enjoy the B&W mocking portions. 🙂
This guy is a joke, one week “House market is souring” next week “HOUSE MARKET IS CRASHING” Scam Artist much
days away from closing..
**sees Graham post video titled "The Housing Market is Sinking"