real estate. Not a single industry produced more  millionaires than real estate because it's the  

easiest and simplest way to accumulate wealth. In the year 2000, the average home price was  

$119,600. Today, in 2021, the average  house price has grown to $374,900. So,  

most people who took a 30-year-old mortgage to buy  a 300-400k dollar house are already millionaires.  

In 1980, the average house price was $47,200.  In the long, house prices do not only beat  

inflation but actually rise significantly. Yeah, a crash is bad, but if you are a  

long term investors, the crash doesn't  matter because prices will bounce back  

right where there have been and keep rising. However, since March 2020, the housing market  

has been going through a wild ride. Prices  have risen by almost 25 percent since then,  

which has led many people to think  that we might be in a housing bubble.  

And a housing bubble means that sooner or later,  it's going to burst. We have already talked  

in the previous videos about why the market could  possibly crash? Why are we in a bubble? And how  

could it end up driving the entire economy down? However, not everyone agrees with this opinion.  

There are plenty of respectful  people who believe that we are  

not in a bubble and the rise is natural.  Yeah, sooner or later, this boom will stop,  

but it's not going to crash since the rise this  time is nothing like the 2008 crash. We no longer  

have predatory lending, and most mortgages  are given to responsible buyers and so on. 

They have a point. There are many reasons  why the housing market may not crash.  

So let's take a look at why the housing crash  is not happening, at least this year. Because in  

order to make an objective opinion, it's important  to look at it from an opposite point of view. 

So, if you are ready, give this  video thumbs and let's dive in.

The number one reason that house prices rose so  much was because of short supply when there was  

a huge demand. That's basic economics. In fact,  in 2020, there haven't been many houses built,  

and covid restrictions have only  slowed down the construction.  

And that not just because contractions  couldn't resume due to the pandemic  

but entire supply chains have been  damaged. Some places entirely shut down,  

others couldn't get their employees back to  the factories, and so on, while the demand  

kept rising due to super-low mortgage rates.  https://fred.stlouisfed.org/series/MSACSR 

Just look at the data. The sharp fall in the  supply of houses hasn't even recovered to the  

pre-pandemic levels. When too much money chases  too few houses, house prices rise that much. 

But why can't they build more houses? Because it's difficult to do that during  

the pandemic and secondly since the 2008 crash,  this industry has slowed down dramatically,  

and you can't pomp it up instantly,  especially during a global pandemic. 

And that's what makes this housing boom  so different from the last crisis.  

Take a look at the supply of houses in  2007 and 2008. At its peak, it literally  

was twice more than it's now. That's why it  crashed. There was an oversupply of houses.  

Sellers had to keep reducing  prices to find a buyer,  

especially when they defaulted on their mortgages. Today, the situation is different. The  

astronomical demand may have ended, but  even if prices drop slightly, there are  

plenty of people who are ready to buy a house.  So experts see two ways out of this situation.  

Price just stabilize and stay where they  are for the next few years or so or drop  

slightly but quickly bounce back since interest  rates are still low enough to encourage demand.

In fact, the chairman of the fed hinted that  the fed is not planning to raise the rates  

any time soon. And that's not unusual because  it's normal for the fed to keep the rates low  

for a few years when a crisis hits the economy.  After the 2008 crash, the fed kept interest rates  

low for the next 7 years, so it's entirely  possible that rates won't rise at least in  

the next 2 to 3 years.  

https://fred.stlouisfed.org/series/FEDFUNDS Thirdly, there is a huge difference between a boom  

and a bubble. There are periods when the economy  recovers from crises and experiences a boom,  

so asset prices rise dramatically,  especially when there is a limited  

supply of that asset in the market.  A boom doesn't necessarily mean a bubble.  

Theoretically, it could turn into a bubble but  that's not always the case, and judging by the  

facts, it doesn't seem like it's a bubble now  due to the reasons we have talked about earlier. 

But you might say there are still millions  under the forbearance program. Once it ends,  

millions of Americans won't be able to keep up  with their mortgage payments which mean, there  

will be millions of houses for sale in the market  which means, home prices will fall instantly. 

You have got the point, but  the data says otherwise.  

At the height of the forbearance program,  9.3 million mortgages were in forbearance.  

If it wasn't for the forbearance program, the  market would have collapsed long ago. But today,  

that number is far smaller. According  to the Mortgage Bankers Association,  

approximately 1.7 million homeowners still  remain in some type of mortgage forbearance plan.  

Of course, if those buyers face foreclosure or  simply opt to sell rather than restart payments,  

then it could cause the number of homes for sale  to rise. But even that is unlikely because a huge  

chunk of them are there because they want to  take maximum advantage out of this program.  

The mortgages that have been given after the  2008 crash are very different to pre 2008 crash.  

Banks are heavily regulated since then  and strictly provide loans only to  

those who are responsible enough not to default  and are able to keep up with their payments.  

But even if hypothetically most of them default on  their mortgages when the forbearance program ends,  

that would only cause a temporary 11% rise in  inventory. But low-interest rates will quickly  

push people to buy those houses. There won't  be bidding wars as we saw thought last year  

when people overpaid for over a million dollars  just to outbid everyone else, which is not super  

smart, because your property most likely won't  appreciate in value in the next few years. 

On top of that, judging by how many times the  government extended the forbearance program,  

it seems like it will be doing  everything possible to prevent  

homeowners from defaulting, even if that  means extending the program to 2022.

The arguments against crashes sound legit, and  that's exactly what could happen. No one knows  

the future, and every prediction has a 50/50  chance. But if we go back to 2007, 2006 or 5.  

There were plenty of economics professors who gave  us multiple reasons why the housing won't crash.  

I mean, Americas largest financial  companies, such as AIG and Lehman brothers,  

have bet hundreds of billions of dollars  against the housing crash since they were  

so confident that it's not going to crash. I am  not saying just because they were wrong last time,  

they are wrong this time, but these opinions  should be taken with a drop of skepticism.  

What we also should consider the  Nature of every crisis is different.  

These 2 crises are not identical. Yes,  they all follow some similar patterns,  

but they are not clear before the crisis, and they  happen due to different reasons. So comparing the  

last housing crash to the next one isn't really  wise. If we knew exactly how all crises happen,  

we would have figured how to solve them long  ago, but we only have learnt how to soften them. 

If you are afraid to invest in real estate,  you always have the stock market, But before  

you start investing in the stock market, you have  to understand the basics of the stock market, you  

have to learn how to read financial statements,  analyze companies and read between the lines,  

that's why I created a short, animated course  on Skillshare that will teach you everything  

you need to learn about the stock market. The  entire course is animated from top to bottom and  

explained so simply that even if you know nothing  about the stock market, you will become an expert,  

the first 100 of you to use the link in the  description will get a 2 weeks of Skillshare  

premium and will be able to watch the course  for free. At the end of the course there will  

be an assignment that you have to completely  and I will personally check your assignment  

and provide you with a feedback.   

And now give this video the thumbs  up that it deserves, and make sure to  

subscribe if you haven't done that yet. Thanks for watching and until next.