the

When Will The Housing Market Crash? (Housing Bubble!)

hey everybody welcome back to whiteboard

finance my name is Marco and I'm here to

help you master your money and build

your wealth in today's video we're gonna

be talking about the potential housing

crash coming up in the next timeframe

you don't have to wait till the end of

the video when I give that timeframe but

I think it's gonna be happening pretty

shortly here in the near future so

housing prices are at record highs which

we all know price per square foot have

never been higher so the logical

question is when will it crash

so the pandemic absolutely destroyed

Main Street and my Main Street I mean

your local businesses your barber shops

your borrowers your restaurants but it

hasn't hurt asset prices and it

definitely hasn't hurt Wall Street yet

so there's a lot of relief that came

from the cares Act which we all know in

the form of stimulus checks PPP loans

small business loans etc etc but part of

this was actually to deal with private

and federal mortgage forbearance so in

today's video we're gonna talk about

three reasons why housing prices are so

high we're going to touch on that very

quickly we're going to talk about the

cares act the unemployed statistics and

also some overall statistics and then

we're going to talk about how big this

potential price correction or price drop

could be and when it's going to happen

and then finally I always end the video

with my thoughts so before I get into

the video very quickly if you're in the

market for a house check out in the link

in the description below I actually

created a home affordability spreadsheet

it's super popular and it's super

helpful just check out the link in the

description below you can get it down

there so let's get right into it

okay so here are three quick reasons why

house prices are so high it's important

to understand this before I go into the

rest of the video I've actually talked

about these three reasons on social

media on Twitter and also on Instagram

if you don't follow me there go ahead

and do that but basically I mentioned

this in my video from about a month ago

if you should buy a house or not in 2020

so if you already heard this you can

just skip this section however I think

it's important for new viewers or people

who have never seen this before to

actually understand it some of the

flights for this very quickly so the

first reason is low interest rates so at

the time of this recording interest

rates are pretty much at their all-time

low for both 30 and 15-year mortgage

rates that are lower allow people to fit

more house into their monthly budget

because that's typically how American

people that's how they think they think

in monthly budget as opposed to just not

having debt so if you can get me a

cheaper mortgage I'm gonna buy a more

expensive house because I can fit it

into my quote unquote monthly budget so

take a look at this chart right here you

can see over the past few years and

decades that mortgage rates are at their

all-time lows right now at the time of

this recording my wife and I are

actually pre-approved for a two point

nine nine percent fixed interest rate

and a 30-year mortgage which is super

cheap that's almost just above the rate

of inflation or the CPI Consumer Price

Index and then also the 15-year at that

same Bank is two point seven nine and

I've actually had people common that

they're finding deals even lower than

that at the time of this recording so

money is cheap low interest rates think

of it like a lever interest rates

dictate everything that's why it's so

important to understand where rates are

at not just for mortgages but just the

federal funds rate in general when rates

are high asset prices are high look at

the stocks all-time highs look at real

estate all-time highs that's because

people are incentivized to put money

into the market as opposed to saving so

when interest rates are high people are

incentivized to save and keep it in

their savings account okay so number two

is high demand so I am a millennial I

was born in 1987 I'm actually right in

the middle of the Millennial Generation

I am I can't get more millennial if I

tried okay so Millennials are actually

the most populous generation in the

United States at the time of this

recording

they actually overtook baby boomers

earlier this year

okay so Millennials are getting married

they're having kids they're trying to

move out of cities and get into the

suburbs or they're trying to stop paying

rent or they're trying to get out of a

small house into a bigger house so if

you take a look at this purchase

mortgage applications or at an 11-year

high okay they haven't been this high in

11 years so there's a lot of demand

going on right now

so this basically boils down to a

classic case of supply and demand demand

causes prices to increase because

there's that pressure on inventory

which brings us to our third point low

inventory so going back to that baby

boomer example all the baby boomers at

least where I live here in Northeast

Ohio

they're sitting on their houses they're

not putting them up for sale because

they know that if they do yes they're

gonna get a lot of money for their house

but they're also gonna have to move into

somewhere else which is very expensive

compared to their house that they're

moving out of so housing inventory is

incredibly low so take a look at this

chart this is actually pulled from the

MLS I've access to the MLS I used to be

a licensed real estate agent I'm no

longer one but I have access to the MLS

let's just put it this way so from 2010

to 2020 you can see how the inventory

for the markets that I'm looking at has

steadily decline and this does echo

what's happening on a national level it

basically boils down to baby boomers not

moving okay so let's take a look at how

the cares act the stimulus unemployment

and also some housing statistics are

going to affect this market bubble that

we have in real estate right now so

there's actually a rule that you can't

foreclose on someone 60 days after March

18th 2020 that is a federally mandated

rule okay so say for example you got

behind on payments and you're basically

supposed to get foreclosed on the

stimulus or the cares Act excuse me

actually prevented that from happening

so you have two months after that the

other one is called mortgage forbearance

I didn't feel like spelling forbearance

I just put four and then that's a

picture of a bear it's actually not bad

compared to my other drawing so there is

mortgage forbearance the ditch that's

not even a joke that's just a terrible

drawing so mortgage forbearance is

basically where your lender allows you

to pause your payments so you can

request forbearance up to 180 days and

then extend it for another 180 days if

you went through a quote-unquote

financial hardship so that basically

tacks on 360 days of mortgage pause or

mortgage forbearance which is actually

going to the end of my analysis at the

end of this video so remember mortgage

forbearance in that 360 days and then

finally a big factor that not a lot of

people are talking about when it comes

to mortgages or even rent if you will is

unemployment so there's 30 million

unemployed that numbers probably

sort of 15 or 20 depending on people

that are kind of like mooching off the

system but basically everyone knows

about that $600 a week in addition to

what your state is going to give you for

unemployment anyway that actually ends

at the end of July so remember that date

as well that's at the end of the job and

the end of July of this year of 2020

so when that $600 a week goes away

people are either have to go back to

work they're going to stay on

unemployment or they're gonna have to

basically just scrape by with what they

have okay if they don't qualify so 37

percent of renters and 26 percent of

homeowners or at least somewhat worried

that will face

that they will face eviction or

foreclosure in the next six months so

that's about 1/3 and 1/4 you guys that's

not just renters that's also people that

own their homes which I think will

actually play into this whole thesis of

this video at the end and then finally

in June you can see this headline right

here 30% of Americans missed their

housing payment in June so does this

really mean does it sound as bad as it

is I don't know because when you say

housing payment that's actually broken

up between renters and people that own

their home so it's not like one out of

three people are gonna get foreclosed on

for example and that's just for the

month of June who knows if those

situations will get better but they also

may get worse as well so taking all

these numbers into account let's go into

how big of a price correction I think

there will be and when it will happen

okay so how big that's what she said

how big will this price correction be so

I think that if you take a look at this

chart right here you can actually see

housing prices versus inflation this

chart actually goes back to earlier than

1980 and it goes all the way to pretty

much where we're at in 2020 right now so

you can actually see here the consumer

price index that's the solid black line

on the bottom that is typically how

inflation is measured some people argue

that because they change the definition

but just for the sake of this chart

let's just pretend that this is the cost

of inflation so in 1980

you have your benchmark of a hundred

meaning that let's just say a dozen eggs

cost a dollar and then you have in 2020

it's basically at 300 meaning that it's

gone up three

times if you will so you can see here

that housing prices they don't

appreciate shout out to my friend George

gammon he has a very good video on this

but housing typically just keeps up with

inflation it's not necessarily a great

asset to own especially if it's your

primary residence you can see here that

housing prices don't appreciate they

inflate so you can see in Ohio six that

was pretty much the housing bubble which

crashed in a 708 I hit it slow and

2011-2012 and then it started to

appreciate after all the money printing

and the low interest rates from 2010 and

on so you can see here that we are

basically in 2020 where housing prices

are at a ridiculous all-time high and if

they revert back to the CPI we should

see a 34 percent decrease in housing

prices so if we see a 34 percent

decrease in housing prices that means a

house that's a hundred grand should

realistically cost sixty four if you see

a house that's two hundred grand and

these are Midwest prices relax everyone

in California don't care go to a trail

or a bla bla bla bla bla well move okay

a two hundred thousand dollar house

should be closer to 132 and then a three

hundred thousand dollar house should be

closer to 192 do I think that this is

going to happen overnight

well wait till the next slide to find

out okay so to finish off these videos I

always give my thoughts at the end based

on my research again I don't have a

crystal ball I'm just a guy on YouTube

do your own research and critical

thinking so if you take a look at all

these factors you have the cares Act

which provides 180 plus 180 days of

forbearance aka 360 days if you use both

of them you have 120 days to actually go

through a proper foreclosure process and

then you typically tack on 30 days of

admin stuff so if you go to the auction

title paperwork deed you know all those

things that go into buying a house let's

just tack on that so with my personal

thoughts I think that prices will start

to correct once we start to see these

foreclosures come on the market taking a

little bit of pressure off that demand

that we talked about I think that's

going to happen within 12 to 24 months

and I know that's a pretty wide time

frame and

people wish that it was gonna happen in

six months because they're probably

waiting like me to buy a house however

the the truth is is that this probably

won't start happening until a year from

now I'd say 12 to 18 and 24 months now

the thing is this is not going to drop

34 percent as that chart indicated that

would only happen if there's an extreme

bubble that popped I think that this is

when prices will start to correct so as

always you guys I hope you got value out

of this video this is recording at the

end of June if you guys haven't gotten

into the stock market yet check out my

link below for weeble they actually give

you two free stocks just for signing up

so it's basically like free money

whether you decide to use it or not

check it out I hope you got value out of

this video if you did please share it on

Facebook please share it on social media

for anyone that's interested in buying a

house within the next 12 to 24 months as

always thank you for watching and have a

prosperous day I'm just waiting for the

negative mortgage rates I can't wait to

get paid to take out a mortgage that's

gonna be nice and I'm gonna go on Robin

Hood and buy Nicola

[Music]