We've got to talk about the housing market because we've got some massive problems, a little bit of good news, but some massive problems and some cracks that are showing and in this video i'm going to show you some things you probably haven't seen before. So let's talk about what's going on with the housing market and then potentially try to understand why it's happening and maybe cast out how long do we think this pain could potentially last for the housing market? When would it begin first of all, then, when we actually think it's going to end and where the opportunities to buy or sell or refinance real estate? Let's get into that right now, quick note: this video is brought to you by the programs on building your wealth. A link down below including an amazing course on do yourself: property management, rental renovations. That's a phenomenal course for helping out with liability, saving thousands of dollars.

We've got a partnership with lowe's for home improvement. Gets you a lot better pricing so check that out, link down below, of course, if you're an agent, i think it's a great time to become an agent link down below, got a course for real estate, investing if you've never thought about investing in real estate before Zero to millionaire real estate investing i'll link down below you can even bundle these together. There's a coupon expiring at the end of this month and we'll have our largest price increase ever after that, when prices start going up also do deal analysis in our zero to millionaire course. So if you submit a real estate deal for analysis because you've gone into escrow i'll personally, take a look at that and give you my sincere opinion of your deals.

So take a look at that link down below okay folks. So the first thing that we've really got to pay attention to with real estate has to, of course, do with inventory, because we know that inventory is at substantially low levels, but what we're concerned about is the potential fear? Okay, this is very hard to quantify, but this will make or break the real estate market, and so that's why i'm going to start with this. The thing that you have to be concerned about is people who own real estate getting fearful that prices are going to come down and then deciding to sell their real estate. That is the most important distinction now when people hear that they think oh, but wait a minute kevin, but if you sell, then you have to rebuy wrong.

If you're a homeowner and you sell you could rent. Also, you don't have to be a homeowner to sell. You could be an institutional owner of real estate or you could be an investor in real estate and we don't need a hundred percent of people decide. Do we want to sell or not what we really only need is maybe an additional 1 million homes, or maybe an extra 10 percent of homes to sell and all of a sudden, you have a completely different inventory dynamic than you previously did.

So one of the first and in my opinion, most important leading indicators of pain coming to the real estate market is what's happening with new listings. Now this is market by market. I'm going to show you where you can look this up. This is very early, so we're not going to get crystal clear data yet, but you want to pay attention to what i call inflection points in the real estate market.

You could do this with your local mls by talking to your real estate agent, or you could just use the redfin data center. Just know that the redfin data center is about two to three weeks delayed. So if you want accurate week by week, information you should talk to your agent about this, but take a look at this. You go to redfin data center.

At first glance, you don't really notice anything scary, because if you go to new listings, you don't notice anything that is breaking trend and what you should do. When you look at this trend, is you should uncheck the 2020 box, because we want to compare to 2021 19 and 2022. there's there's too much noise in 2020, and that makes sense, but where what you want to be watchful of is when you start seeing stuff Like this go to a hot market like austin, texas, very hot, real estate market, austin labeled, the number one place to live in america by multiple different magazines - people flocking there from california a lot of really incredible bullishness on austin. What do you notice here? An above trend break in new listings, and this is something that we should be concerned about in terms of starting to pay attention to, because this is a four week line, which means it's kind of like a moving average.

It's not an exponential moving average. It's a four-week moving average, which means for you to break trend this substantially on a four-week smoothed out line. Your latest data points have to be substantially higher, and that is a trend that you want to start paying attention to when you start seeing these new listings in various different cities break trend, break trend, break trend, break trend, that's when you start getting concerned. This is not happening broadly yet, but you're starting to see some of the inflection points and again it's a four week moving average.

So it really is going to take some time, but it's one of the first things that we want to start paying attention to. What's another leading indicator for problems in the real estate market? Ah, yes, well, another very popular leading indicator are new home sales. New home sales are really unique, because new home sales are tracked based on when homes go under contract, whereas regular resale homes are tracked when they close. So that actually means if you want to get more recent data about the state of the market.

Now you look at new home sales and let me show you the estimates for new home sales from the prior from from the prior month, we were expecting to get somewhere around 750 000 new home sales. This chart you're gon na see right here is the spread of expectations for new home sales. So when i hide myself here, this shows you that right here this was sort of the average estimate that new home sales were going to come in at 750 000.. Some people thought it was going to come in at say: 7.65.

Some people thought closer to 700 000 in new home sales, but everybody was pretty convinced that we were going to be somewhere over here. You can see the bell curve right here, of estimate puts us somewhere about 745 000 right, look at where new home sales actually came in, and this is absolutely mind-blowing and i do want to say because i see the question. Yes, my programs on real estate do help internationally as well. 90 of the content applies, you'll have to make some adjustments for taxes and loan types, but the real principles of building wealth are going to apply to all markets, especially in terms of like how to renovate and things like that, now take a look at this.

This is scary. This is like oh crap. This is where new home sales actually came in way over there at 588 000. Nobody was freaking close.

It's such a bad freaking miss that you literally have the analyst writing. Yesterday we saw a horrendous new home sales number. Nowhere near expectations and at uh at the number, the lowest reading since april of 2020. This may be the beginning of a trend.

Okay, we need to talk about that. We need to talk about april of 2020, but i need to give you a quick reminder that if you want to get up to a thousand dollars in totally free stock with public, make sure to go to metkevin.com public, we'll have a link in the description and Down below public is a company that does not use a payment for order flow. When you sign up and deposit any amount you can now get up to a thousand dollars in a totally free stock. Just for signing up public is a social platform where you could actually follow me on public as well and see commentary from either myself or other individuals.

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Okay, also not that one of these buttons there we go, let's go here, so when we talk about this being the worst since april of 2020, why was april of 2020, so bad well april of 2020 was uniquely interesting because everybody we locked down and everybody had A substantial fear that the real estate market was going to face a wave of foreclosures and that the market was going to crash. That did not end up happening because we ended up getting mortgage. Forbearances and people were essentially able to not make payments on their homes. For up to 18 months take that extra money add it to the back of their existing loan and then potentially refinance the other, the entire loan from a 30-year mortgage to a 40-year mortgage, which means you have actually lowered your payments now.

Foreclosures are a big concern, and this is where a lot of folks ask me kevin. Are we going to see a wave of foreclosures like we had in 2008? I believe the answer to that is no. That's because the average credit score of a buyer in 2008 was 670.. The average credit score of a buyer today is a hundred points higher in the range of 770.

That makes it much more clear that the people buying homes today are your wealthier demographic, and we know that wealthier demographics right now actually hold substantially more cash and therefore more purchasing power and more of a buffer than the lower income. Demographics that we that we have. You can see on screen here top 20 percent of substantially more household income than the bottom 80 percent of individuals. It's also worth noting that the typical net worth of a homeowner is somewhere in the neighborhood of a hundred seventy to a hundred eighty thousand dollars.

The typical net worth of a renter is about five thousand dollars, so first of all, that should be a hint to you that you should absolutely get into home. Ownership definitely check out the programs on building your wealth, real estate link down below, if you're clueless as to how to even get started real estate, or maybe you know, a lot about real estate and you're like okay. Maybe i can learn more, you can. Will we see a foreclosure crisis, though the answer in my opinion here is a solid? No, i don't believe we're going to see a substantial foreclosure crisis and foreclosures, even though they're up from year over year numbers where we had a foreclosure moratorium, and this is why you have to be careful about foreclosure click bait that we see online.

It's people like, oh my gosh, so many more foreclosures than last year, well yeah! Well, we had none last year, we're still at about half of the levels of foreclosures now than we had prior to the pandemic. The reason for this is thanks to the ability to repay rules and dodd-frank regulations, it's very difficult now to qualify for a home, and generally it's the higher income demographics who are qualifying for homes. Those are the people with more cash and who are more resilient to inflation because they have assets now. Does that mean that real estate prices are going to keep going up? Well, my opinion, not necessarily just because we are not necessarily going to have a wave of foreclosures, does not mean that, in my opinion, we are going to see the real estate market get out of this economic slowdown scot-free.

In fact, lowe's gave us a little bit of insight into their research. They told us that they believe we have at the moment or or at the first quarter of the year we have somewhere between 20 to 28 percent excess demand uh for homes. That is the opinion of lows, and it could be anywhere in that range. Interest rates have gone up about three percent for the average buyer, since the lows that we had maybe somewhere between two and a half now because interest rates have slightly ticked down again a little bit.

But we think that as soon as the federal reserve starts, their quantitative tightening we're actually going to see treasury yields increase even more than we have previously, and we could end up having those six percent mortgage rates again. Quantitative tightening starts june 1st of 2022 and i wouldn't be surprised to see the 10-year treasury rise once we actually start having waves of tightening and we're not going to have our most severe tightening until three months after june, which is actually september 1st. That's when we're going to start seeing our more severe tightening where we're really tightening to the tune of 95 billion dollars a month, but anyway, every one percent that mortgage rates go up. We know that buyer purchasing power goes down by about 10.

Well, if interest rates have gone up two and a half to three percent, then that means all of this excess demand in the range of negative 20 to negative 30 percent is probably going to weigh and eliminate all of the excess demand. So maybe, where now at these higher rates, we actually have a stable market or a market where prices might be prone to come down about, say five percent right roughly in the middle here, making an estimate. Maybe that means prices come down at the end of the year by about five percent. Well, that's nominal.

That's not a reason to sell right, and it's also difficult to refinance right now, because rates have gone up so high. Probably a better thing to do is getting like a home equity line of credit, because those are usually variable interest rates, and so, when rates come back down, those will come down again, which i suppose you could do with like a larger refinance as well. If you wanted access to capital, but in my opinion now is not time, the time to buy the time to buy is once we figure out what direction the real estate market is going to go in. I personally think best case scenario we're somewhere between a zero to negative five percent decline by the end of the year because of excess demand getting crushed via interest rates solely.

However, folks what is and and well let me finish, also the thought that, should you sell, probably not because it's going to cost you somewhere between 7 to 10 percent, to sell that's because you've got real estate commissions of between four and five percent. You've got escrow and title fees of somewhere about one and a half percent you're, probably going to set aside one to two percent in repairs. You're gon na have vacancy costs uh all that stuff adds up to about seven percent in selling costs, so like selling real estate is expensive, like if you have to pay a tenant to get out that adds to the cost as well. All that stuff is expensive.

So like, if you're selling real estate you're giving up seven to ten percent, so probably not a good thing to sell. If you only think, prices are gon na come down zero to five percent. Do we think they're going to come down 40? No like no! I don't think we're gon na see a 2008 again because we have a different quality of borrower. So what is the the the thing that changes? Everything? Well, it's this right here, it's what we started with it's inventory.

If inventories like, if excess demand, has been eradicated because of rates, but then inventories skyrocket problems, that's when you get actual problems and that's in my opinion, where you could see a real estate decline, uh anywhere in the range of negative 10 to negative 25. That's my expectation somewhere in that range. Nowhere near that 08 level. This would really like 25.

This would really take a panic of like tucker carlson going. Oh, my gosh real estate's, plummeting this that whatever investors starting to dump trying to like sell at the top or whatever right that's that 25 fear. That 10 is probably, in my opinion. My base case scenario that we're going to see about a 10 percent sell, sell down, which means, if you sell costs you 10 to sell you, you kind of like broke even right, uh, depending on, of course, when you sell.

So those are my thoughts for the coming real estate crash and, if you want to dialogue with me or me, look at your deal or kind of talk about that check out. The programs on building your wealth, a link down below especially those real estate ones, and do remember that i think, there's a high likelihood of inventory being the driver of these moves, so pay attention to that inventory. Statistic: watch what the 10-year treasury does when we start seeing the tightening cycle and you're going to know a whole lot more about what's coming to the real estate market. My thoughts thanks for watching alright, what.