Name: What’s Coming in 2026 is Worse Than 2008 Housing Crash
Uploaded: 2025-12-26T18:21:26.000Z
Duration: 10 min 49 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...

If you are planning to buy a house, then watch this video.

What's happening in the housing market is way worse than most people imagine.

People have been waiting for rate cuts to be able to afford a house.

Despite the Federal Reserve cutting interest rates to 3.5%, mortgage rates are still as high as they have been back in 2023.

In fact, back in summer, before the rate cuts, I told you that cutting interest rates is not going to lead to low mortgage rates.

Everybody for some reason believes that if the Fed is going to lower down interest rates, then we are going to have lower mortgage rates.

But that's not how it works and it's not going to happen.

So even if the Fed is going to lower down interest rates, mortgage rates are not coming down.

And here is the Chairman of the Fed admitting what I have already told you.

Yeah, so the housing market faces some really significant challenges.

And I don't know that, you know, a 25 basis point decline in the federal funds rate is going to make much of a difference for people.

So should you wait for lower mortgage rates or just go ahead and buy a house?

What will be happening in the housing market in 2026?

This is why people believe that lower interest rate is going to lead to lower mortgage rates.

Because people assume that banks borrow money from the Federal Reserve and then loan that money to the borrowers.

So if the bank can borrow that money at a lower interest rate, then they can offer lower mortgage rates for borrowers, which is why there was so much pressure on the Federal Reserve.

Donald Trump has also attacked the Chairman of the Fed multiple times.

And there has been very loud voices in the Congress that we want lower interest rates so that the American people can afford a house.

But the reality is that interest rates are at 3.5%.

And that's because the Federal Reserve has abused the system over the last 20 years to the point where interest rates no longer impact the housing market.

So even if the Fed tomorrow lowers interest rates to 0%, it is not going to bring mortgage rates below their current rates.

Well, well, if that's the case, how is it possible that back in 2020, the Federal Reserve somehow brought mortgage rates to 2% or 3%?

Let's say we have a bank that provides you the mortgage.

Banks usually don't like mortgages because these are 30 year loans.

And so many things would happen in the next 30 years.

What if the bank offers you a mortgage at 4% interest rate and then suddenly, 10 years later, inflation rises to 7 or 8% and the bank is going to go out of business.

So in order to make housing affordable mortgage rates to sustainable level, we have turned the entire housing market into a tradable security.

So the banks often take your mortgage and turn it into a mortgage backed security and then sells it to investors.

And based on the demand and supply for these mortgage backed securities, the yields on these mortgages will be determined.

So for example, if there is such a strong demand by investors to buy mortgage backed securities, then the bank can offer you a lower interest rate because they know that they can sell it to investors.

But if investors are not willing to buy this mortgage backed securities, let's say for 5%, then how can the bank offer you a lower mortgage rate when it can actually sell it to investor at 5%?

So the bank will have to offer investors 6% maybe then 6.5%.

But if there is suddenly a huge demand by investors to buy this mortgage backed securities and they're willing to accept, let's say 4%, then the bank will offer you a 4% mortgage rate because they know that it will take that mortgage and sell it to investor at.

Well, if this is the case, how is it possible that back in 2020 we had such low interest rates?

In 2020, when the pandemic happened, the Federal Reserve panicked.

Because a few years earlier, or about 12 years earlier, we had the housing market.

And what caused the housing market that literally crushed the entire global economy was that investors lost hope in the housing market and they stopped buying mortgage backed securities.

So when these investors stopped buying mortgage backed securities wouldn't be able to provide the mortgages.

So the banks would go bankrupt, the borrowers won't be able to borrow money.

Which is why the Federal Reserve stepped in and they started buying the mortgage backed securities.

So to prevent the 2008 style financial crisis, the Federal Reserve stepped in in 2020 and started massively buying mortgage backed securities.

The Fed spent about $1.3 trillion to buy mortgage backed securities.

That strong demand has dropped the yield on mortgage backed securities to about 2 or 2.5%.

Which is why your mortgage rate was about 2.5%.

In other words, the Fed was the largest investor in the housing market back in 2020 and 2021.

And the moment the Federal Reserve start buying mortgage backed securities in 2022, mortgage rates have increased to about 7%.

The real question is that why can't the Fed simply do the exact same thing Again?

The Fed made it possible for the average American to buy a house.

There is a huge difference between the Federal Reserve buying mortgage backed securities and investors.

When investors, people like you, people like me, or literally huge fish funds.

When we are buying mortgage backed securities, we are doing that with our hard earned money.

I have earned that money and I used my money to buy the mortgage backed securities, the pension fund or the large financial institution.

Nobody gave them the money, they earned that money and now they're investing that money.

And when you're investing your money, you're thinking about how can I maximize my returns.

So if you don't know, for example how to invest, you can literally learn everything you need to know about investing by checking the first link in the description of this video.

Now this, this course is going to become a paid course very soon, but for now it's free.

So if you log in and join right now, it will be forever free for you.

However, when the Federal Reserve is investing in the mortgage backed securities or any other asset, the Fed does not work hard to create that money.

The Fed literally just presses the button and money is created.

So the Fed can literally create trillions of dollars.

Which is why when the Fed is buying mortgage backed securities, it is directly increasing supply of money.

Why did house prices jump by 30 to 40% between 2020 to 2022?

That's because the Fed simply increased the supply of money.

On one side you are making housing affordable through low mortgage rates in the short run, but

in the long run you suddenly massively increase the supply of money.

And house prices simply became unaffordable for the vast majority of Americans.

Which is why the only reason you would use that nuclear option.

If you are on the brink of a catastrophe and you want to prevent that catastrophe, but

if we don't have a crisis and things are fine, then you can't simply just print money to make housing affordable.

Imagine if in 2020, on one side we had the pandemic, on the other side we had the 2008 style financial crisis.

I think the global economy would have literally collapsed.

Just because the Fed is printing money, it doesn't mean that we are creating more houses.

The real problem with the housing market is that there is simply a shortage of houses in the market.

So printing money is not going to create more houses.

For example, zoning lows does not allow to build enough houses.

Homeowners don't want more houses to be built because the value of their houses is going to drop.

And there are other reasons that prevent us to build more houses.

So the core problem is that there aren't enough houses and none of these solutions is going to solve it.

If you pay attention at house prices, they haven't actually been rising in the last two to three years, especially since 2022.

In fact, in some places, house prices have been declining.

But starting from 2026, house prices will be rising.

And that's because the Federal Reserve will start quantitative easing.

Quantitative easing simply means that the Fed will be buying securities, but not mortgage backed securities.

If the Fed would have purchased mortgage backed securities, then mortgage rates would go down.

But the Fed will be buying short term Treasuries.

In fact, it will be buying $40 billion of U.S.

treasuries every single month to ensure that the yields on US Treasuries will not get out of control.

But whether you like it or not, any kind of quantitative easing, regardless if the Fed is buying U.S.

treasuries or mortgage backed securities, it is still going to increase the supply of money, which means that it is going to lead to higher house prices.

So starting from 2026, we are going to have a much bigger problem.

On one side, mortgage rates are not coming down to any sustainable levels unless demand will increase for mortgage backed securities.