Name: The Housing Market is About To Flip - Here is Why
Uploaded: 2021-08-17T19:50:03.000Z
Duration: 10 min 20 s
Description: Thousands of YouTube videos with English-Chinese subtitles! Now you can learn to understand native speakers, expand your vocabulary, and improve your pronunciation...

In June 2021 home prices across the United States surged by 24.8% to a median sales price of $386,888 according to Redfin during the same time period, The number of homes sold increased by 20.6 And the number of homes for sale tumbled by almost 40%.

Just two years ago, right before the pandemic.

The medium home price was around $250,000.

We have already explained in previous videos why home prices have been rising so dramatically.

But the situation is so unpredictable that most people can't wait to decide what they should do.

Should you buy a house now or wait another few months with the market crash this year or next year or maybe it will never crush and rice forever.

But here is what I want to point out when we talk about crushes about what could happen.

Some people get mad and say name the date or you have said it earlier but it didn't crush.

You see no one can tell you anything for sure.

If anyone had inside information and you fully sure what will crush he would have shortened the entire market and earned a few $100 billion the next day or maybe trillions but that's not going to happen because first of all, no one knows the future and number two, if you use inside information to benefit yourself that is criminal offence for which you can get jailed.

So you won't be able to enjoy the billions of dollars when you are stuck in prison.

But what we can do is analyze the market, look at different factors.

Use historical data to interpret the current events, look at the current trends and find out how similar trends have ended in the past.

That will give us a glimpse into what could happen.

So what we are going to do is find out where the housing market is today.

There are certain factors that influence and drive the market and by looking at them, we can get an idea of where the market is headed.

For example, if we all pump a price of a certain asset, it is eventually going to plummet because it was raised artificially and it doesn't carry any real value.

It is sort because we have decided that we are going to keep buying until the price shoots to the moon.

Some people might argue that unlike the last crash, prices are rising naturally.

There is a real shortage of houses in the market and on top of that material prices have risen, which resulted in a higher cost of building new houses.

But why the cost of materials has risen in the first place.

To think about One of the main reasons is unexpected demand.

Since the 2008 crash, this market has been heavily regulated so that just enough houses are being built to keep up with the demand.

So when the demand for houses doubled or tripled, suppliers were not ready for it.

On top of that, the pandemic slowed down the existing supply chains, which only made the situation worse.

So naturally there were not enough materials to catch up with the demand based on the basics laws of economics.

When demand rises and supply stays the same prices rise, of course, we all know that the main reason why demand draws so dramatically is because of these juicy low interest rates.

I mean, getting a mortgage 2% ready is a dream come true.

It is probably the best investment you can ever make.

But the problem is that the demand pushed prices to rise so much that these low interest rates are no longer making sense.

The median house price in 2019 was $275,000.

If you had taken a 30 year mortgage at 4% interest back, then your total cost of the house would have been $378,000.

That is without taxes, insurance or renovation.

Just the cost of the mortgage, let's compare that to the median mortgage in 2021.

The median house price in 2021 is $363,000.

Let's say you will get a 30 year mortgage at 2.8%.

The total cost of your house without considering taxes and other expenses Would amount to $429,565.

In other words, buying a house in 2019 where mortgage rates were higher was cheaper than now with these super-low interest rates.

So if you think that you're getting a good deal, just because interest rates are so low, you're mistaken You got to take a look at the numbers again on top of that because the demand is so high and not many are willing to sell since prices are still rising.

That's why we hear so many stories about people over paying by 2030 or even 50% just to be able to buy a house.

But if you're planning to buy a house, then it's probably the worst time to buy a house.

Even though we no longer have predatory lending practices like we did in the 2000s, that is still a clear sign that the market is overvalued.

But most people don't look at that, they see home prices are rising.

The fear of missing out pushes them to buy a house, but that only makes the situation worse as it already did.

Fomo as it's known, is a social and anxiety stemming from the belief that others might be having fun.

While the person experiencing that anxiety is not present.

The fear of regret, which may lead to concerns that one might miss an opportunity to make money in this case buying a house that will appreciate dramatically in value in the next year or so, but that often leads to disastrous consequences.

That's what led many people to invest in Bitcoin when it was trading at $64,000 or in 2017 when it hits over $20,000 But then plummeted to less than $4,000 in less than two years.

So never let the fear of missing out drive your investment decisions.

Yes, you're going to miss a lot of opportunities and you're not going to hit them all and if you try to get them all, you will most likely fail as a wise man once said, you only have to be right once.

And by the way, house prices are already slowing down for the exact reasons we have discussed.

When 10 people are bidding for one house landlords are just waiting for the buyers to beat each other out.

Some homes are selling for 50% higher than they are listed in the market.

When you look at it from this perspective, it is very clear that house prices should crash or at least be corrected.

But unfortunately, the market is not as free as many of us are led to believe it is heavily regulated by the Fed in 2008 when the economy collapsed.

Yes, the Fed intervened and bailed out many huge corporations, but it reacted too late.

So it took the economy a really long time to recover.

So this time the Fed took an entirely different approach.

It decided to react to fast and prevent a crisis at the expense of inflation.

Yeah, the Fed kept saying that inflation is not an issue, but we all know that it is an issue.

In fact the Fed already began recognizing that, but it didn't back then because if the Fed would have said that inflation is coming, people would have spent their money as soon as possible, causing more inflation which would drive more people to spend, causing more inflation by now, it's clear that the Fed has chosen a strategy to inflate the market until prices correct themselves and that's exactly what happened.

That's all has led to a higher ratio between house prices and income.

There is a co relation between house prices and people's income.

The vast majority of homes in the US are purchased two mortgages for a number of reasons.

First of all, houses are too expensive and most people can afford one without getting a mortgage.

And secondly, you get a lot of tax advantages if you take a mortgage, but when house prices rise significantly faster than income, people will no longer be able to afford the house.

Someone with a $50,000 could afford the $250,000.

House assuming a 20% down payment, which was the median house price in 2019.

But a 2021 with a $50,000, you no longer can afford a house.

Let's be honest, income hasn't grown much since then.

Whenever you see that the gap between people's income and house prices widen.

Be careful because that is unsustainable.

Despite all of these factors, it's impossible to make any predictions because what's happening now is unlike anything we have ever seen in history.

The Fed has never been so easy to inflate the market with dollars and it has been in recent years.

So only time will tell whether it's going to end with a crash, a correction or something entirely different.

But before that happens, go ahead and pick up some free assets.

If you use the link in the description, you can get two free stocks from Weibo.

So go ahead and give them a try or check out my course and skills here where you can learn how to invest, how to analyze companies and find great investments.

The link is in the description again and now give this video a thumbs up that it deserves a next year to subscribe if you haven't done that yet.

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The Housing Market is About To Flip - Here is Why

anxiety

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pandemic

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